We noted in Tuesday’s commentary that the small reversal bar on Monday cast a bit of doubt in the short-term as to whether the DAX could continue without first pulling back in modest fashion. Yesterday, we saw a little bit of weakness, today so far we are starting out that way as well.

On a further decline our first noted level of support is the rising trend-line off the July 6 pivot which crosses under the pullback low created on August 3. At this time, it could also coincide with the April peak level of 10486, or roughly thereabout (support/resistance is not typically an absolute level, but rather a zone.) We look for this to be a test, hold, then an eventual push higher towards a fairly significant area of resistance surrounding 10900; this view hasn’t changed from yesterday.

DAX Daily

(Click on image to enlarge)

What would clearly call this outlook into question would be a strong push below the before mentioned support area. With that said, waiting for support to be tested, then a turn upward in momentum gives traders a chance to enter and then have a backstop (beneath the low of the turning point at support) from which to place stop losses. If the market sails on through support with no turn, then no entry and we will need to reassess our view.