#202417 - a weekly #priceaction market recap and outlook - dax
Dax
Quote from last week:
bear case: Bears showed strength this week and bulls continued to take profits. Every bounce was sold and this pull back is now as deep as the one we got from mid 2023-12 to early 2024-01, which is around -4%, which is, given the +28% rise, almost nothing. Now we are at the first very important level to determine the strength and speed of this market cycle. If we bounce here and markets shakes off all risks again, we could stay inside a trading range at the highs, or we fall through 18000 and get the first leg of a new bear trend. It is very unusual for markets to go from one trend to another but it can happen. But betting on it, is usually a losing strategy. Bears did an amazing job and closing 2 bull gaps in 2 weeks and their next target is to keep a pull back very shallow to trap many late bulls. The perfect scenario for bears could be as drawn but I do think this is low probability. It’s more likely that we will see a bounce here. A retest of the extreme is almost always expected.
current market cycle: Bear trend - all bull trend lines but the one from the Covid lows are broken and the only thing right now keeping this from a panic sell, is the weekly 20ema around 17500. Could it also be the daily 50ema (around 17925)? Sure, who knows for certain? Both are reasonable arguments.
key levels: strong support 17900/18000 - 18400 (unsure where resistance will be, we have to find out. 18400 is my next best guess but could very will be 18600)
bull case: Bulls bought aggressively at the 2024-03 low, which was their last hope to stop the flush to 17000/17150, which produced a big bullish reversal bar on the daily chart. They desperately need follow through above 18000 on Monday.
bear case: My bearish wave thesis was drawn 2 weeks ago and right now I’m unsure about end of the bigger W1 where W5 should lead to below 17200. So case a is, the darker red I to V wave, which would result in a bigger bounce now for II, to form a broader bear channel. Case b would be to continue inside this very narrow bear channel with very small intraday pullbacks that get sold immediately, very much analog to the bull trend we had from mid 2024-02. Case a is much more preferred because it’s low probability to not get a bigger bounce around big support areas. If bears manage to print below 17600 again, this might just go straight down to 17000/17200. Bears doing an amazing job of continuously selling the 4h 20ema, the 9th time now since the ath. That is unusual to say the least.
outlook last week: “Tricky one this week but bear with me. It’s an easy if statement. IF tail risks (mainly middle east) continues to get worse, we could see a very deep sell off. Like -4 to -5% deep to 17000. IF market shakes it off and we see strong buying pressure at this key level, we can see a big bounce, targets are 18400, 18600 and retest of ath 18800...."
→ Last Sunday we traded 18082 and now we are at 17925. Market sold off hard to 17607 but bulls reversed it. So outlook was meh, given that we just moved sideways on the week.
short term: Absolutely neutral as of this posting. Tough spot right here where you should not engage new trades until we see more price action. Market is in balance around 17900-18000 area until one side clearly break out of it. Below 17900 is retest of 17600 and below that is probably 17200. Above 18000 is the upper bear channel line 18100ish and above that I’m unsure. Could be 18200/18400. I wait.
medium-long term: Third red week in a row, which has not happened since 2023-10. We need to see a proper bounce to calculate new targets or bears just grind this down inside the narrow bear channel.
I expect at least a -20% correction in 2024. —changed -30 to -20% because price is moving higher while time is getting shorter for the target. Medium term is 17100 while I think we can touch the big bull trend line starting 2022-10 around 16700 in 2024. —unchanged part
Chart update: Chart updated with my preferred wave thesis I to V.
Quote from last week:
bear case: Bears showed strength this week and bulls continued to take profits. Every bounce was sold and this pull back is now as deep as the one we got from mid 2023-12 to early 2024-01, which is around -4%, which is, given the +28% rise, almost nothing. Now we are at the first very important level to determine the strength and speed of this market cycle. If we bounce here and markets shakes off all risks again, we could stay inside a trading range at the highs, or we fall through 18000 and get the first leg of a new bear trend. It is very unusual for markets to go from one trend to another but it can happen. But betting on it, is usually a losing strategy. Bears did an amazing job and closing 2 bull gaps in 2 weeks and their next target is to keep a pull back very shallow to trap many late bulls. The perfect scenario for bears could be as drawn but I do think this is low probability. It’s more likely that we will see a bounce here. A retest of the extreme is almost always expected.
current market cycle: Bear trend - all bull trend lines but the one from the Covid lows are broken and the only thing right now keeping this from a panic sell, is the weekly 20ema around 17500. Could it also be the daily 50ema (around 17925)? Sure, who knows for certain? Both are reasonable arguments.
key levels: strong support 17900/18000 - 18400 (unsure where resistance will be, we have to find out. 18400 is my next best guess but could very will be 18600)
bull case: Bulls bought aggressively at the 2024-03 low, which was their last hope to stop the flush to 17000/17150, which produced a big bullish reversal bar on the daily chart. They desperately need follow through above 18000 on Monday.
bear case: My bearish wave thesis was drawn 2 weeks ago and right now I’m unsure about end of the bigger W1 where W5 should lead to below 17200. So case a is, the darker red I to V wave, which would result in a bigger bounce now for II, to form a broader bear channel. Case b would be to continue inside this very narrow bear channel with very small intraday pullbacks that get sold immediately, very much analog to the bull trend we had from mid 2024-02. Case a is much more preferred because it’s low probability to not get a bigger bounce around big support areas. If bears manage to print below 17600 again, this might just go straight down to 17000/17200. Bears doing an amazing job of continuously selling the 4h 20ema, the 9th time now since the ath. That is unusual to say the least.
outlook last week: “Tricky one this week but bear with me. It’s an easy if statement. IF tail risks (mainly middle east) continues to get worse, we could see a very deep sell off. Like -4 to -5% deep to 17000. IF market shakes it off and we see strong buying pressure at this key level, we can see a big bounce, targets are 18400, 18600 and retest of ath 18800...."
→ Last Sunday we traded 18082 and now we are at 17925. Market sold off hard to 17607 but bulls reversed it. So outlook was meh, given that we just moved sideways on the week.
short term: Absolutely neutral as of this posting. Tough spot right here where you should not engage new trades until we see more price action. Market is in balance around 17900-18000 area until one side clearly break out of it. Below 17900 is retest of 17600 and below that is probably 17200. Above 18000 is the upper bear channel line 18100ish and above that I’m unsure. Could be 18200/18400. I wait.
medium-long term: Third red week in a row, which has not happened since 2023-10. We need to see a proper bounce to calculate new targets or bears just grind this down inside the narrow bear channel.
I expect at least a -20% correction in 2024. —changed -30 to -20% because price is moving higher while time is getting shorter for the target. Medium term is 17100 while I think we can touch the big bull trend line starting 2022-10 around 16700 in 2024. —unchanged part
Chart update: Chart updated with my preferred wave thesis I to V.
