"Headline risk"... I was repeating that for several days, since news driven moves are reality now. After very unusual day on Friday, when we had instead of one predictable news driven move on Powell speech, two unpredictable moves on China news and Trump tweets, where are we now, and what is higher odds scenario? Let's start with Powell, and market that was expecting help from FED. This is a 49 second snippet from Friday's Recap video.
Then Trump sealed the deal with his tweet storm, and now we could get a gap down on Monday. Hope is a strong emotion, but data behind is not changed. Trade war got worse.
Among other things, this is what I wrote to Subscribers in the INFO part of the Morning notes for Thursday, Aug 15th, so 10 days ago - made while I was in Greece on holiday:
Where is SPX after they got a rate cut? Around 150 points below. So, that was not good enough for bulls, on a much stronger market than DAX. Bullish scenario of calling new ATH for DAX in these conditions, when we have bad fundamental data, mostly bad earnings by biggest companies, and “recession warnings”, would probably require a US-China trade war FINISHED, and another EU QE program. So, IMO – higher odds to see 11k than 12,200. Important for trading is to understand that market is very sensitive to news, to use larger stops than usual, not to be stubborn to counter strong moves. This is a high opportunity environment, where loses are normal, but also easier to cover. In day trading it is important to have a bull/bear line, a place where bias will likely change, in case we see a strong and sustained momentum. Use stops, don’t allow market to run over you. I have seen that many times. It is better to take -1R loss, to rethink, and if nothing is changed, trade same direction, but also to be able to say to yourself: “this is wrong, I should reverse”.
Nothing is changed. Let's see some charts now.
1. DAX Futures Weekly chart for "big picture"
December 2018 low is most important Support on this chart, but there are plenty levels above it that are decent Supports also. Still around Weekly SMA200.
2. ES_F daily chart for correlation purposes
Some similarities in these ranges. Move down, zig-zag in a range - likely continuation down, especially when we are aware of the fundamental drivers behind the down move. Again, nothing is resolved there, and cannot be repaired soon. As always - SPX is stronger market, and when and IF it goes down into correction, weaker markets will follow down. DAX is weaker market.
For $SPX I recommend Weekly video by Peter Reznichek.
3. DAX CFD Daily chart and current range
A 100% expansion of the range to the downside would target around 11k. We can look differently on this, like on last chart.
4. DAX Cash Index Daily chart
On Friday market tested gap at 11,563 BUT in Afterhours session, so this gap is not filled. Observe the gap around 11,015 that is aligned with 100% range expansion from chart above.
5. DAX Cash index 60 min chart
When you trade ANY Index, then IMO, you should look on both Index and Futures/CFDs chart (depends what you trade). Index charts are often forgotten. RTH session IS the most important part of trading, with biggest amount of volume. Market likes to make significant highs or lows in the RTH session. That is why swing highs and lows made in premarket or afterhours are questionable and prone to be revisited. Just like that low around 11,450 was revisited. and later we got a lower low around 11,270.
Conclusion: Both technical and fundamental picture IMO is favouring more downside to come. Damage was made, it is hard to repair quickly. Where it could go? I don't know, and I will trade like always - from one inflection point to another.
Again - get use to volatility and bigger ranges. In daytrading, we WILL get opportunities on both sides. It is up to us to determine on each and every day what is higher odds scenario, and to trade it accordingly. You can choose to just trade one direction, and that could be the best possible decision in case of trend days.
Note to Subscribers of DAILY DOSE OF DAX Service: As usual, fresh Morning notes and updated Chart with zones on Monday, Aug 26th.