The German 30 index (cash) drifted northwards after refusing to close below 13,380 on Monday, despite sinking to a six-week low of 13,260 earlier in the day.
The rebound has stretched beyond the simple moving averages (SMAs) in the four-hour chart, but currently the bulls seem to struggle to overcome the 61.8% Fibonacci level of the 14,133 – 13,260 downfall at 13,800, where the surface of the Ichimoku cloud is also positioned.
With the Stochastics looking to change direction in the overbought territory and the RSI testing a major resistance zone above its 50 neutral mark, downside corrections in the price cannot be excluded in the near term. Still, unless those indicators show a convincing downside reversal, the bulls may keep pushing towards the 13,930 – 13,970 congested region. Should the 14,000 mark prove easy to breach too, the index may re-challenge its record high of 14,133.
Note that a golden cross between the 50- and 200-period SMAs is in progress after six months, flagging a potential improvement in the market trend. Meanwhile, the red Tenkan-sen line has forcefully crossed above the blue Kijun-sen, while the MACD has finally entered the positive region, also reflecting growing optimism in the market.
In the event of a pullback, the index may seek shelter near the 50% Fibonacci of 13,696, a break of which is expected to generate another negative extension towards the 38.2% Fibonacci of 13,593.
Looking at the medium-term timeframe, the market refused to adopt a neutral outlook following the bounce on 13,260.
Summarizing, the German 30 index is expected to extend its recovery in the short run, although some stabilization cannot be excluded.
