Germany’s DAX index has fallen sharply during the first half of this week along with its major stock index counterparts in the US and UK. As of Wednesday, this plunge has brought the DAX back down to approach what is perhaps one of the most important major support levels in recent months – 9300.
This support area has already held up solidly three times within the past six months – one time in August, another in September, and then most recently, two weeks ago in late January. This confirmed triple-bottom follows a prior test at the end of 2014. Now that the index has once more come down to approach 9300 support, the key question is whether or not the level has the strength to hold up yet again.
For the past two months, since its December high above the 11400 level, the DAX has fallen within a well-defined downtrend that has given back all of the gains the index made in October and November of last year. So far, this plunge has erased approximately 18% of the DAX’s value during the course of around two months of general decline.
This drop in Germany’s benchmark equity index has been caused partly by a combination of persistent economic factors that could continue to pressure European and global equities. These factors include consistently depressed crude oil prices along with slowing economic growth and financial market turmoil in China.
Therefore, despite its long-term uptrend, the DAX continues to display a bearish trend bias on both a short-term and medium-term basis. These downtrends would be confirmed on any sustained breakdown below the noted major support area around 9300. In the event of this breakdown, key downside support targets remain at 8900 and 8500. In the event that 9300 holds once again as support, any pronounced bounce should find major resistance around the key 10100 level.
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