Entire week on DAX was preparation for a breakout attempt, as we had multiple tests of important R zone around level 12,150. After a good drop and two trend down days on Oct 1st and 2nd, at the end we got a scenario of higher low, with a single down day on Tuesday, Oct 8th. "Small trade deal" made bigger impact on DAX, then on SPX, which is still in the range.
Week ahead of us:
During next week, there will be several important data releases from China, including Trade Balance, CPI y/y, GDP q/y, Industrial Production y/y and more. Those releases can be market movers as well, and at least influence on premarket (Overnight) sessions for European and US indices. On Tuesday we have German ZEW Economic Sentiment, important data for DAX. Various FOMC members will speak during the week.
Earnings season in US officially starting on Wednesday, with Alcoa reporting, and Netflix will report the same day. Financial sector usually go first, with Citigroup on Tuesday, then American Express and Bank of America and so on. Earnings season in Germany will begin a week later, at least for #DAX30 components.
Chart #1 - FDAX daily and weekly
DAX is still below resistance trendlines, but with the very strong weekly candle into them. Above daily and weekly SMA50 / 200. Both 12,500 level and trend lines were tested several times before.
Chart #2 - DAX Cash Index Daily
With trend up day on Friday, DAX closed above 12500, leaving a gap on 12,164.
Chart #3 - SPX Cash Index Daily and ES_F Daily
While DAX closed +2.86% on Friday, SPX closed with +1.09%. In late US session there was a bit of selloff, since the "Small Deal" news was not exactly what market wants. As always, market wants FULL PUNCHBOWL, not this partial deal. Tariff Man / The Chosen One / Tweet Meister said that was the best deal in history of mankind. Still to be confirmed. Buyers have the upper hand, and still make higher lows.
Chart #4 - SPX CFD 240 min
But SPX is still in the multi month range, going nowhere fast. Last 4 hour candle was a pullback.
Chart #5 - DAX CFD 240 min
Again same tail on DAX 4 hour chart. Also higher lows.
Conclusion:
Looking at all of this charts, from Weekly, Daily and down to 240 min, can we conclude anything? Anything other that move on DAX was much stronger than on SPX, maybe because German economy need good US-China trade deal more than US perhaps? Or that this move is pretty overextended now, and that dip below 12500 AGAIN would not be surprising? Still, expect that every dip is going to be bought, at least short term, while market waits for more inputs. And while market is waiting for the "Big Deal", Earnings season will start.
DAX Bulls need price to hold above 12,500 and then they can attack prior swing highs, roughly on 12,650 and 12,900. SPX bulls need market to move above ATH. Until some more positive news, there can be more sideways-up activity. Markets have just swallowed bad German Manufacturing PMI, and bad US Manufacturing and Non-Manufacturing PMIs, so IMO - they need good earnings season and real trade deal to move higher. Also maybe some time to digest Friday move and news. As long as "they " push higher and make higher lows, buyers have the advantage. No Big Deal for a while, and again we can expect sideways. More hard tone and this deal go bust... again down. Two most important things that market currently cares about are trade deal and rate cuts. Everything else is stuck under the carpet for now.
For short-term trading, all of that is just background information, sometimes good to understand the context of each individual day and to prepare yourself to execute, knowing which side is dominant, and where you can have some edge. For short-term trading, knowing context and then EXECUTING on inflection points is what makes you money, as we can clearly see on next chart.
Chart #6 - SPX CFD 30 min
#1 - Fading LTF S zone
#2 - Long on a pullback after price made a b/out of R zone, now acting as S, two times
#3 - Fading R zone, two times
#4 - Fading R zone, two times
#5 - Longs on false b/down below S zone, two times
#6 - Long on a pullback toward broken R zone, now acting as S
#7 - Long on a break of R zone, and long on a pullback
#8 - Selling the LTF R zone on Friday - two opportunities to do so
I didn't even marked all of the opportunities on this chart. On Pre-determined zones. "Small deal" and all of that, but stil, market made a dip from LTF Resistance good enough that even with 4-5 points of a stop, you could make a +4R trade. Power of good location. Good trading location is your No.1 trading edge.
Being decisive to PRESS THE TRIGGER on the good location in day-trading is often much more important than anything else, especially when market is in the range.
Cheers, StrayDog