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Technical Analysis of the DAX 30

If we look at Fig. 9.21(a) from a technical point of view, it is clear that the market is currently in a strong bear phase. On a fundamental level, this makes sense: France is heavily exposed to Greek government debt, something that has already caused the credit rating of two major French banks to be downgraded.

Since the beginning of August, renewed fears of a Greek default has wreaked havoc on French share markets. The DAX dipped decisively below the Ichimoku Kinko Hyo cloud on the 1st of August 2011, reaching 6891.30 at one stage before it closed at 6969.70.
After that, it was only bad news. On the 12th of September, the price briefly touched a low of 4963.80 before closing at 5145.20. Billions of Euros were wiped off investor’s balance sheets in the process.
The Greek ghost has not disappeared yet: emergency talks are the order of the day and although the DAX has recovered somewhat during the last few days, it is still far below the Ichimoku cloud. The green Chinkou Span line is also still far below the price of 26 periods ago. This confirms that we have not seen the end of the bear run yet.
If the Greek debt issue is resolved (at least for the present), we will most likely see an upsurge in the DAX, although it is still a long way before the price will emerge upwards from the Ichimoku cloud again – nearly a thousand points at this stage. This is where traders may start looking at medium term long trades again.
If the price drops below the red Tenkan Sen line in the near future, it might be a good time for short trades, since it could be the signal that we will soon see new lows.
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