Dax Technical Analysis 06/07/2015

[warning]Trading today is likely to be volatile![/warning]

Good morning traders

Dax analysis is below the Greece story


So Greeks vote no to further austerity, no surprise there then, meaning ECB probably won’t lend the banks any more money, and Greece exit looks likely. People assume the troika won’t let Greece fail, but a similar thing happened to US when the federal reserve let Lehman brothers fail leading the financial crisis in 2008. There’s a contagion risk

A lot of Greece unite in celebrations for a no vote in their referendum. But what a hangover they’ll have when ECB decide not to lend their banks any more money. I wonder when they’ll bring in their own currency again.

Tsipras and Varoufakis have the backing of the country for its negotiation position, Samaras has resigned. This doesn’t make talks with creditors any easier though. Draghi and the ECB will have to make the most difficult decision on what to do with Greek liquidity, because there is no money. No options are good for Greece, but with little to no growth prospects to lessen their ballooning debt through restructuring and a reluctance to conform to fiscal reform in order to simply maintain an unsustainable reliance on borrowing, Grexit has to be the way forward, providing there are ways to contain the contagion risk.

So what next?

Tsipras will now try to negotiate with the lenders again. If the creditors accept, then a new programme will be born, ECB will remove the ELA cap and deposit limits will gradually be removed, austerity will be repackaged and repitched, same shit new wrapper, Greece will conform and life goes on, with caution. If the creditors reject and no new programme is born, ECB will halt ELA funding and a Grexit will be very likely. So if the negotiations fail again, the next step will be a failure to pay state salaries and pensions so the Greek government will issue IOUs, then the ‘New Drachma’ will be introduced and Grexit happens.

Dax Analysis

I am sorry to say to all those bulls who held positions over the weekend, but we have to expect a massive gap lower on open this morning. Some are estimating as much as 4%, so a big initial candle. The main reason for the gap lower, without discussing the various factors at play in detail, is due to uncertainty. Markets clearly hate that. The SPX and NAS100 already gapped lower, so I would expect Dax to do the same.

Congratulations to all those who closed their positions before the weekend, I believe it was the right thing to do to avoid unnecessary risk. Any bears who left positions open, can count themselves lucky that the decision went their way, it was a gamble that worked out for sure, but a gamble nonetheless.

On the big picture we are still in the bearish channel and have plenty of room to move to the downside and still remain within normal limits, looking at the 4-hour chart. If the gap lower breaches the support base then we can move as low as 10600, maybe even 10550 (the weekly S2). This could provide some short term trading opportunities and much of that gap could retrace fairly early in the day findings its way back towards 11,000 before falling again. So this could be the first time we see a fall underneath the 200 day EMA, I would like to see a reaction to that.

Dax Support & Resistance

Daily R211210
Daily R111158
Daily Pivot11082
Daily S111030
Daily S210954
200 Day EMA10870

Dax Charts

Dax Intra-day Chart (4 hour)
Dax Intra-day Chart (4 hour)
Dax Intra-day Chart (30 minute)
Dax Intra-day Chart (30 minute)
Dax Intra-day Chart (5 minute)
Dax Intra-day Chart (5 minute)