Monday

Germany Dax Update

Post a Comment September 5, 2011 – 3:14 am |   | Permalink |  Print This Post |

Dax Crash 2011

OCTOBER 2008

We see similarities now with October 2008 - after the sharp drop in October 2008 - from 6250 to low of about 4250, 32% (3 red candles), there was a brief snap rally to 5400 (small green candle), followed by another red candle to the 4000 mark. This bottom was only 250 points from the initial bottom, 5.9% (4250) but was 25.9% from the top of the snap rally of 5400.

How quick will the fall be from here?

At the time of writing, the Dax futures is at 5450, ie at recent lows. Looking at the chart in 2008, the market closed at about 4580 the day before the market tanked to 4000. That is a >10% one day fall ! On Friday, the Dax closed officially at 5538. A 10% fall will take us just below the 5000 mark. So, expect some panic soon. What we DO NOT want is an orderly and sustained fall. That would drag this fall longer and further down. So if you are holding on to some losing long positions now, your best way out of this is for markets to fall sharply tonight and for you to average down. NOTE : please do not take this as trading advice.

Germany Dax October 2008 Crash Close up

We fell from 7250 to 5450 (24.8%), had a brief rally back to 6000, and we see another drop to make a lower low. Our target is the 5000 mark in keeping with our round number theory. These round numbers exert a strong gravitational pull as stops are often clustered around round numbers - so the point of maximal profit for market makers would be to sweep these stops clean. Once triggered, it could trigger a brief flash crash from the domino-effect of stops being taken out.

Fundamentally, we just heard news that Angela Merkel has lost in the elections in her hometown. The people have spoken - no more bailouts. Smooth talking Obama should be next to go.

Our Trading Plan
We have an order to go long Dax at 4990 for $10/point. We have another $20/point long Dax at 4890. Target exit at 6100-6200.