The German DAX index is presenting an interesting technical setup despite underlying economic challenges in Germany. The economy itself continues to face headwinds, but if one were to look solely at the DAX chart, it might be hard to reconcile this with the reality of economic difficulties. The technical picture suggests that, while there was recent strength, a bearish correction has started to form.
Last week, the DAX broke below a significant black uptrend line that had supported the index for weeks. This breakdown marked the onset of a bearish correction that saw the index fall sharply. Toward the end of last week, there was an attempt at a bullish reversal as buyers pushed the price upward, but this attempt stalled at a crucial resistance area.
This key resistance is marked by the red horizontal zone at approximately 19,300 points. The index tested this resistance during the reversal attempt but was unable to break through. Today, on Monday, the DAX is again bouncing downward from this resistance, confirming its importance as a barrier for further upward movement. As long as the DAX remains below this red resistance area, the sentiment remains negative, and the probability of a continuation of the bearish correction is higher.
A decisive close above the red resistance area would shift the outlook slightly more positive, signaling potential for buyers to regain control. However, even such a breakout would not immediately indicate a strong bullish trend; rather, it would be an initial sign of stabilization that would need further confirmation.
In conclusion, the primary view for the DAX remains bearish as long as the index stays below the 19,300-point resistance. The bearish correction that began last week is likely to continue, with mid-term new lows more probable in the current setup. A breakout above the resistance could change the outlook, but for now, the index's sentiment leans negative.