DAX: Caution with the rebound – Rabobank

Technical analysis can provide useful clues. Economists at Rabobank used the Fibonacci extension to compare the price action in the German DAX Index in 2002-03 and the sharp drop in 2007-09. 

Key quotes 

“The DAX has already reached the 76.4% extension of the 2002-03 benchmark move lower. This level coincides with the Fibonacci 38.2% retracement of the entire move higher from the 2003 low to the record high set in February. There is also a cluster of weekly lows from the 2014-16 period.”

“All those important technical pivots form a support area that may prevent – at least in the short-term – a further drop and could in fact be a platform for a corrective rebound in the coming days.”

 “We are witnessing encouraging signs in the early hours of trading so far today. A close above the 2018 low at 10,279.20 would be an encouraging signal. Such a rebound should be approached with a hefty dose of cautiousness as it could be a bear market rally followed by another leg lower.”