Weekly Blog, Jan 3 2021

Updated: Jan 12, 2021

Reminder from Weekly Blog of Nov 29th, 2020:

We are entering in seasonally bullish period for the markets, and make no mistake - with or without Covid19 cases, market will try to stage a "Santa Claus Rally". The question is - will THEY succeed OR fail, and important is to be ready for both, to be able to switch sides, and not argue with the market, since IT doesn't care about your bias. Remember that trading comes down to monetizing setups, and NOT predicting direction. My standard question every single day IN THIS ENVIRONMENT is: "Where can I get my 30-40-50 points on the HIGH ODD setup".

And we got the Santa Claus rally, but when we compare Yearly performance of DAX versus some other indices, THEN we can calculate from Yearly open of Jan 2nd to the yearly close of Dec 30th, how German DAX made +3.74% yield for 2020. You could say better than Hang Seng that was negative, but SPX made almost +16%, while NDX made a whooping +46% and change.


That can be interesting for investors, but not so much for short term traders.


We SHOULD get plenty of opportunities, since - like was written before, January-February is USUALY a good period, better than Nov-Dec, at least for day trading.



1. Scheduled data for the next week


Bunch of Final Manufacturing PMIs and OPEC-JMMC Meetings on Monday.

US ISM Manufacturing PMI on Tuesday.

ADP Non-Farm Employment Change and FOMC Meeting Minutes BUT without Press Conference on Wednesday.

ECB Monetary Policy Meeting Accounts on Thursday.

NFP Report (Non-Farm Employment Change) on Friday.



2. Charts and Thoughts


Let's start with the FDAX Weekly chart.


Both weekly candles from shortened, 3-day trading weeks, are with rejection candles. Nothing much of a support is there, above 13,460 - which is one of the key levels now.


Going down to the Daily:

Next big level is still around 13k, with the DMA50. Current Daily ATR is 218 points.


Going down on 240 min:

Megaphone looking structure, and once again - nothing much of a LARGE TIME FRAME Supports, besides 13,460 and 13,000/035. Higher highs and higher lows.


For FULL picture, we need a Cash Chart also. Remember: CASH IS THE MOTHER... and Futures and CFDs - instruments that we are trading, are children (derivatives). Always check INDEX chart.


DAX CASH Daily:



THOUGHTS

Question remains - once the "mission" of making NEW ATH is accomplished, what comes next? On Weekly and Daily charts, there are no close above the previous ATH. In fact, this very much looks like a FALSE BREAK above the previous ATH, something that Stock Market Indices are doing frequently. As written before - when price comes near previous ATH, that is a "fertile ground" to shake late participants, especially Johnny-comes-lately buyers. We got that also with this U-turn that was made on Dec 18th, and a move down to almost 13k.


Both down and later up move, were made on huge gaps. Although there are differences in Cash/Futures quotes, and ATH levels are not the same, ~13,460 is important on both. Previous ATH levels are IMO - good to have on your charts. First big hole on Cash is 13,602-717 and I will monitor price action around that, keeping in mind untested cash closes from the chart above. Back testing 13,460 has good odds to happen, and THEN we shall see what next. Since we are talking about DAX, and not NDX - we COULD get a 13,000 - 13,900 range for some time first. As always - we make scenarios, and adjust to them accordingly, trading on SETUPS ONLY. No Setup = no trade.



3. What can we learn from previous weeks?


There are patterns / setups, that can be mastered, and you can trade it over and over again.

Like good old concept of Acceptance and Rejection.

Market REJECTED the price from entering inside the premarket range, providing a long entry on Wednesday, Dec 23rd 2020. Or REJECTED from premarket range on Tuesday, Dec 29th 2020 - attempt to get inside premarket range from below was rejected, and we got a sell after the NYSE open.


Subscribers:

You have Setups Gallery for ENTIRE year of 2020, with each day covered with screenshots, hundreds and hundreds of repetitive setups are there. Educational videos re Inventory Correction, Favorite trading setups, Trading pullbacks, Stops and stop placement, and many other are also there - use that.


 

In short term trading it is very important to properly understand context heading into every day, to know from which side wind is blowing - who has the short term control, and which side will be forced to liquidate IF and WHEN market hold above or below a certain level. What is the level of volatility, what can we expect from any particular day, what market already done in premarket session, what possible setups can be available, and so on... the things that we constantly learn in the DAILY DOSE OF DAX.

Cheers, Relja a.k.a. StrayDog