Intraday Market Thoughts

Shanghai & DAX-30 Dance around 200-DMA

by Ashraf Laidi
Aug 19, 2015 21:12

Overnight, China central planners saved the 200-DMA in the Shanghai Composite, with an intraday 6.7% recovery following an earlier 5% decline. This is especially crucial as the index held above its 200-DMA since Jul 23, 2014. The latest selling pressure may have resulted by three consecutive daily gains in the Chinese yuan, following media assault from the rest of the world on the day of the CNY devaluation. Coincidently, the Shanghai Composite's late Wednesday session recovery emerged on the day the CNY depreciated for the first time four days.

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Shanghai & DAX-30 Dance around 200-DMA - Dax Shanghai Aug 19 (Chart 1)

DAX Heading to 10,000

You don't hear commodities and the Dax mentioned often in the same sentence. But 3 of the 4 worst performing shares in Germany's Dax index over the last 4 weeks are associated with gas and oil (RWE -51%, E.ON -24% and BASF -12% from Jul 20 to today). As the index falls below its 200-DMA for the first time since January, we note that each of the two occasions of the sub-200-DMA drop in December and January lasted no more than two days. We would have to go to the infamous October 2014 for the last time the index fell 12% below its 200-DMA.

Both of the Shanghai Composite and Dax, the 50-100 DMA Death Cross has already occurred. It is a matter of time before the former extends selloff to 3,100 and the latter retests 10,000.


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