The dunk and reverse in the DAX (FXCM: Ger30) on Monday came at a fairly significant spot on the charts, as key horizontal support was tested at the day’s worst levels. On a closing basis, with the DAX moving back above the 8/22 low, confirmation of a double-top from the 8/15 and 9/8 peaks was not completed. At least not yet.

Yesterday’s sharp reversal came as a bit of a surprise, especially in the States where the decline began on Friday and was largely erased in Monday trade. Was it just a shot across the bow, or a one-off event to shake the free before moving back to new record highs in the S&P?

The strong reversal in the DAX from support shows the importance of those peaks created from May through July as support. We will use yesterday’s low at 10320 as our proverbial ‘line-in-the-sand’; a closing daily bar below will expose at the least a retest of the broken 2015 trend-line. As long as it holds then the DAX has potential to recover back towards the top of the range near 10800 or better.

We had a nice look on the intra-day time-frame on Friday, with a trend-line holding the key to short-term guidance; in the days to follow we will be watching for any new key technical developments on the sub-daily chart which can offer us solid guidance moving forward.

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