Dax Technical Analysis 01/06/2015

Good morning traders!

Wow, it’s the 1st June already and this year is flying away so quickly, summer officially can begin and barbeque season can be upon us once more. What typically happens in the markets during this time?

Well, historically liquidity dries up as people go on holiday and reflect on the incredible returns they have made so far in the year and things slow down. So what’s on the agenda in the coming months?

The signs are still present of a rebound in the US economy and the Fed has been doing a good job of managing expectations in the market regarding lift-off. I think that it is likely the Fed is close to ticking all the boxes it needs for lift-off now, considering the slack in the labour market has reduced, wage growth indicators look to be increasing, and inflation figures seem encouraging. It is still waiting confirmation on the causes of the Q1 GDP weakness.

So if we get the lift-off then markets typically react with higher bond yields, normally in the months preceding the rate hike, EURUSD will likely drop lower, stocks stay choppy whilst digesting the impact on risk sentiment. The questions remains: ‘when will it happen?’. Who knows for sure.

Regards the technicals, I will still take a bigger picture approach to the Dax. We are looking at the four hour chart below and it looks to be at a pretty important juncture right now. The historical trend line from October 2014 is being tested once more and should it crash through current levels below 11150, I personally take a pretty big loss on the chin, but we open up the door to a potentially larger move down.

Greece still looms so the uncertainty will keep the market choppy, just watch for the break down. A bull may consider a long approach here because of the trend lines, but I am not considering a new position. I won’t short a break down, but I am sure there are plenty who would.

Dax 4-hour Chart
Dax 4-hour Chart