German Stock Index Could be Leading the Way Down

Today 02/21/22 the main US stock indices were closed for the Presidents day holiday.  The German Stock Index – DAX (DEU40) was trading.

Please see the daily DEU40 chart courtesy of Trading View.

Since March 2020, the DEU40 has had a similar pattern to the S&P 500 (SPX) .  On 02/21/22 the DEU40 had a cross of its 50 – day moving average (MA) below its 200 – day MA.  This is  called a “Death Cross” and usually signals a sharp decline could be imminent.  However, sometimes it could be a lagging  indicator.  Note that in  March 2020 the “Death Cross” came at the crash bottom.

The evidence from the  hourly Point & Figure chart indicate that the current “Death Cross” could be signaling  the start of a sharp drop.

On 02/21/22 the DEU40 had a decisive break below important support and implies  a drop to at least the next Point & Figure support at 13850.  If that support level is broken the DEU40 could decline to a Fibonacci .382 retrace of the bull move that began in March 2020.

Traders are currently long half of a 50%  position of non-leverage SPX funds with a stop loss on a  move below SPX 4290.  If after the open of the SPX session on 02/22/22 – 9:30 AM – ET  the stop is  triggered,  use  the proceeds to short  non-leverage SPX funds.  Since there could be a gap down of the SPX on the 02/22/22 open use a 1% move above the short entry price as the stop loss level for the short position.

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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