State of DAX - Calender Week 39

The end of September was reached and October is finally here.

What a month! September was brought the DAX losses > - 3,5%, as this blog post about relative index performance shows.

People from the crypto scene are already talking about the "Uptober", because they expect that September is the weakest month of the year and it can only get better. While BitCoin, Ethereum and other crypto currencies already show signs of improvement, this can not be said for the German stock index DAX.

So - where is this index standing and what can be expected from the next days or weeks?

Technical Chart for DAX

DAX technical chart created at tradingview.com
 

Let's face it: The DAX is captured within the range from 15 000 to 16 000. In this range, it is still trading below the SMA 20 and it even crossed the area around 15 000 again. Envelopes state that the index is oversold. The RSI is below 40 and points downwards, aiming at 30.

That's the negative part. Let's focus on the positive aspects now: The DAX did not fall below 15 000, which has been an important support area since April of this year. Also, the DAX stopped at the SMA 200 and EMA 200. At the moment, the price is near multiple support areas. Will they hold and will the price bounce upwards or will those support areas be cracked by the bears? I don't know. The next trading days might show. Remember that October is another weak month (seasonality), though.

The technical chart will brighten up when the DAX trades above its SMA 20 again and manages to overcome the level of 15 800 again. Also, the SMA 200 and EMA 200 should continue to hold. IF the DAX will try to recover from recent losses, the *max* target for the next ~ 5 days might be the SMA 20 an then 15 800.

Market Breadth Data for DAX

 Market breadth data chart provided by www.advance-decline.net

The Advance Decline Line for DAX shows no bigger abnormalities.

The McClellan Oscillator for DAX has been below the zero line and declining, hence giving bearish signals. 

The McClellan Summation Index is declining and went below -20, hence also giving bearish signals.

Until here, market breadth for DAX does not indicate a turnaround of the short-time downtrend.

 

What's still missing is analyzing the graphs showing how many DAX members are trading above their important averages (SMAs):

 

 DAX market breadth image provided by https://www.advance-decline.net

As stated in last week's blog post, we have a new data provider for this data. This is why I created a separate graphic.

According to this little market breadth dashboard for DAX, we have numbers that worry me a little bit:

• The percentage of DAX components trading above their SMA 50 declined sharply to 15% (was 37,5% two weeks ago).

• The percentage of DAX components trading above their SMA 100 also declined sharply to 27,5% (was 45% one week ago).

• The percentage of DAX components trading above their SMA 200 remains at 60% (was 60% one week ago).

Those stats begin to look similar to the numbers we've seen during the huge dip around October the 28th. At least the numbers of DAX components trading above their SMA 200 remains stable.

State of DAX - Summary

Technical chart - bearish.

Market breadth - bearish.

The DAX looks weak and I do not dare to give an estimation when the situation might brighten up again. The only positive thing might be that there are still enough buyers in the area between 14 800 and 15 000 that prevent the DAX from declining further. As long as those buyers are still there, an even bigger correction is off the table.