European stocks bounce, but stay vulnerable (DAX and EURO STOXX 50 forecast)

Intermediate
  • A rebound to start the week by European and global stock indices, maybe some position squaring ahead of the US election.
  • In addition, with Biden holding his strong lead in the polls over the weekend, markets are looking for a smooth transition of power, now comfortable with a Democrat victory and even a blue sweep.
  • However, the underlying aggressive “risk off” theme from latter October remains intact, still driven by:
    • Surging COVID-19 cases in Europe
    • Strong lockdowns measures across the continent
    • Increasing cases of the virus in the USA
  • Below we review the German and pan-European benchmark indices, the DAX and EURO STOXX 50.

DAX day trade outlook: Still very bearish, despite bounce 

Day trade update and view

A Monday rebound through resistances at 11696 and 11756.5 but capped below the next barrier at 11951.5, at 11910, and whilst below 11951.5 we still see bearish forces from the aggressive, latter October breakdown through key June and May supports (11589.5 and 11510.5,) plus the prior plunge through key support at 12199.5 (shifting the intermediate term outlook to bearish with a large Head & Shoulders pattern), to keep the threat to the downside Tuesday.

Day trade setup

  • We see a downside bias for 11802, 11701 and 11534.5; a break here maybe aims for 11447 and 11313.5.
  • But above 11951.5 opens risk up to 12084 and possibly 12177.

DAX intermediate-term outlook

The late October sell-off below 12199.5 signalled an intermediate-term shift to a bear trend.

  • Downside risks: We see an intermediate-term bear trend to target 10856.5 and 10159/10000.
  • What Changes this? Above 13018 shifts the intermediate-term bear trend to neutral; through 13163 to an intermediate-term bull trend.
8 Hour DAX Chart
8 Hour DAX Chart

EURO STOXX 50 day trade outlook: Looking for a roll back lower

Day trade update and view

A significant rebound Monday above resistances at 2982 and 2998 and overnight above 3031, but capped by our 3063 barrier at 3049 and whilst below 3063 we hold onto negative  forces from the very aggressive, latter October sell-off through multiple key supports from September, June and May, to keep the risk lower for Tuesday.

Day trade setup

  • We see a downside bias for 2994/90 and 2947; a break here aims for 2927 and maybe 2887.
  • But above 3063 opens risk up to 3095 and possibly 3114.

EURO STOXX 50 intermediate-term outlook

The push below 3139 signalled an intermediate-term shift to a bear trend.

  • Downside risks: We see an intermediate-term bear trend to aim for 3046, 2844 and 2690.
  • What changes this? Above 3349 shifts the intermediate-term bear trend to neutral; through 3395 to an intermediate-term bull trend.
8 Hour EURO STOXX 50 Chart
8 Hour EURO STOXX 50 Chart

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

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