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.