Dax40 weekly review 22. 08. 2022 - 26. 08. 2022

Dax40.22 08 2022. Before After


Pre RTH Kick Off Notes

Dax continued to slide Friday afternoon following further downside in the US. It gapped down overnight and came close to testing 450 in the pre mkt. This level could be pivotal for today especially as it lines up with S&P looking to test 4200 a key level for the bulls to hold if this rally in the US has more to go. As there is nothing on the scheduled data front today we might wait for the US RTH to open before we get anything decisive. If we do break below 450 watch out for it being either real or false as it could be a good spot to stage a spring back up the charts. Below here the 400 area and 350 areas are important levels. Follow the roadmap levels noted and keep an eye on pa as it unfolds for scalps and indications of bigger moves that may be unfolding.

Post RTH Review

I said above Dax continued to slide Friday afternoon and it continued further down the slope today! Bears were in charge all day they weren´t waiting for the US cavalry. We had a loser from 1st test of S after the open but there were some good opportunities to join in later. Patience pays :). I´ll not cover all the possible trades here in detail as I´ve noted them on the After chart above and they are pretty clear. The best / easiest trade for me today was the pullback to the top of our zone and the 38.2% Fib to join in the selling spree. Plenty of points on offer even after an initial loser. Hope you grabbed some !

Dax40.23 08 2022.

Before After

​Pre RTH Kick Notes

Before I get to the charts and levels I want to remind you of a couple of things.

First price can run much further than we think. Sure, you know this. You´ve been told this many times and seen it with your own eyes. But I wonder how many of us actually sit in trades for the full duration. I´d wager most take profit far too early, I have a tendency for this myself being a scalper by personality - although to counter this and in my defense, I never have problems with cutting losers. I am not afraid to lose, understand its a natural consequence of trading, and that keeps me on the right side. If you had the problem on both sides i.e. not letting your winners run but allowing your losers to then that would be a very worrying trait and will eventually lead to ultimate failure. I´m not saying we try to pick tops or bottoms in running trades / profits - that´s just guessing in my book. But what I am saying is that it pays to follow strength or weakness and to not use an arbitrary number of points as a target or let the natural fear of giving back profit drive you to close too soon. I´ll get back to this another day. For now just something to bear in mind. Its down to psychology and mindset and how our brains work. If this is a problem for you - it needs to be fixed.

Second I know that by simply putting zones and levels on charts it naturally leads us to be thinking that every S zone should be traded long and every R zone to be traded short. That is not the case and not my intention but the very fact they are there triggers these thoughts when we see price moving to and into them. It something I have noted many times personally and in others. They become somewhat like indicators, moving averages etc. and because we can see them we seem compelled to act on them even when price action itself is telling us otherwise. It´s as if they are sub consciously forcing us to be counter trend traders - not a good look! You have to use S & R intelligently. If a S zone is sliced through with some gusto like yesterday, then it makes no sense to be expecting a different outcome on the next levels down. We have to wait, observe the market and only when we see an indication of some strength or that the zone looks to be holding should we act. We have seen this a couple of times in the past week. Price has pushed down hard and cut through S levels pretty easily. There is great merit in trading the 1st test of a zone as we don´t know in the the first instance whether it will hold or not. But when price action gives us a reason not to hold or trade then we must take note of that and not simply trade every subsequent S zone similarly. Read of pa is more important than marked up levels and zones. Don´t fall into the trap of trading them just because they are there. If price is falling be thinking more in synch with the trend, the weakness, where can I catch a pullback to go short not to be thinking where can I buck this trend and buy!. Watch the tempo, speed and candle formations around them and act accordingly. Trading needn´t be complicated but that doesn´t mean its always (ever?) easy. We must watch, observe and take action on a number of factors the chart provides to us not just levels.

Ok just wanted to mention these two points - now back to todays charts.

We are clearly in a down shift mode atm. We seem to have had the buying spree that pushed us hard in the "bear market rally" and now we´re coming off. Whether its a normal cooling off or the start of a more pronounced bear leg we don´t know. But daily context should have us thinking shorts are likely to be more advantageous than longs - for now. Anything can happen in a days trading and an up squeeze can easily trigger - Dax loves fast moves to counter a prevailing short term trend :). So we must be on guard to that and ready for what pa gives us but context is bearish for now.

We have flash German and Euro zone pmi´s out just after the open and US pmi´s this afternoon

We have tagged the 50DMA again and are sitting at the daily halfback of the swing up. This could stall further down moves or it could be cut through. The US is following a similar pattern - weakness across all indices. Watch what happens, use the zones as guides not as absolutes for entries and exits. 13000 is not far below - this could act as a psych level. Think clearly and trade well. Have a good one compadres.

Dax40.24 08 2022.

Before After

Pre RTH Kick Notes

Quick ´housekeeping´ point before I get to todays chart. I have always delineated my charts by time to enable me to see the RTH Dax session - 9.00 - 17.30 CET and the overnight "premarket " so I get a better feel for the index hours vs rolling 24 prices. Its something that seems obvious to me. However I am aware that brokers across the globe operate different timeframes and provide rolling 24 hour prices so it may be less obvious to others in different time zones. The RTH session is when the Frankfurt market is open, has the most volume and is for me far more important than out of hours data. I take all my cues from the RTH and I am aware others may not. I just thought it worth a mention :).

One other quick point and that´s a thank you to those of you who have bought my book (s) on trading. Understanding my method and how I read the Dax undoubtedly helps in conjunction with these notes. Moreover I appreciate your support for all the free stuff. Many thanks :).

As we might have expected yesterday was a fairly consolidated day after the previous days expansion to the downside. While we still had opportunity to scalp the evolving pa from pre set levels, reference levels and regular patterns, the theme was still on the downside. We dropped to our 13100 zone in the overnight session and we have zones roughly 50 points apart further down at 13050 and then 13000. These are in play for today if the downswing is to continue and until we get further notice that's our bigger picture context. Note the 61.8 on the D1 which comes in at almost precisely 13000 and decent structural support. The other thing of note is that below 13000 we don't have anything much on the H1 structure until we get to around 12850. For today though I suspect if we get down to 13k we should expect a bounce.

To the upside we have pcc at 13194 and the 250 ish zone above that where we have clean H1 bodies and only wicks above. Same at the 290 / 300 level.

The US continued to drift down yesterday and overnight with S&P nearly testing the 4100 level which we might get today and below there we have 4080 a key low should the big fig break. Dax is following and taking its cues from its big brother across the pond so until we see any upside expansion in the US we can expect Dax to be fairly well content to follow suit.

Nothing on the scheduled data front until the Jackson Hole Symposium kicks off tomorrow and US PCE o Friday - Remember Powell likes pce so it will be eagerly digested for rate clues. But that's not till Friday.

My plan today is as always to watch the pa unfold particularly around the noted zones and to keep a keen eye out for scalp opps.

Anything can happen so while my context read is bearish still, I´m never one to try to impose my will on the market and should we get any pa suggesting any short squeezing I´ll be quick to follow - the market is always right no matter what we may think :). Have a good one compadres.

Post RTH Review

After an initial pump & dump in the first 30mins Dax has been building a sequence of higher lows and higher highs all day - a tell as to what and where we might expect some trade set ups. We had a couple of S & R zone trades but more scalp trades from evolving pa but all from regular reference levels.

I don´t know how you prefer to trade, whether you´re scalp orientated as I am or interested in more standard zone to zone action so I´ll cover them all. However in my experience of Dax, it pays to build up a good play book of scalp type entries as there are usually far more of these than straightforward short and long zone to zone plays. I am also aware that many of these scalps could be "sub" trades of zone to zone trades. For example if you were long from S zone at 9.30am this morning you may simply have preferred to hold to R at the close of play. That would have been a great trade with around 125 points on offer.

Alternatively you could have been reading the tape and looking to take price action scalps as it evolved and been happier with shorter term trades in between the S and R zones. Its horses for courses and no one cap fits all in trading. Each of us does what we need to do to "get the bag" :).

Below are the trades I could see from todays tape with a brief comment on each.

1 - 1st test of S zone which may have been a loser, BE or a good runner depending on where you entered, placed stops and managed.

2 - a more conservative entry if you weren´t already long at 1.

3 - a scalp short from PCC. Alternatively it could have been a good full or partial close target on the long from below.

4 - was a better scalp long opportunity from the open level, structure where the open was acting as R prior to it being broken to the upside, and the 61.8 Fib (sorry I forgot to put in on the chart but pull a fib from Hod to Lod at that point and you´ll see it). You can also see price was balancing on the open 132 level with no M5 close below it. In my book perhaps the clearest scalp entry of the day.

5 - a pullback long scalp opp from pmh (pre mkt high) following the sequence of higher lows.

6 - a scalp short opp at the current Hod another typical ref level we can use every day.

7 - another long scalp opp from pmh with tight stops in case it broke under.

8 - short at 1st test of R.

As you can see there were and always are plenty of opportunities on Dax each day for zone to zone trades and/or scalps. What I hope to do here is to show you how I look at and read the tape as it unfolds and frame my trades accordingly. Its difficult to explain the thinking behind every opportunity but a look at the chart should help. I am a great believer in keeping my charts as clean and simply marked-up as possible. I am a visual thinker and it helps me to "see" a clean (naked - well almost) chart so I can think through the scenarios without any other chart "trash" distraction. Visual clarity is a massive benefit in helping to think in real time as the tape is shifting. Hope you had a good one dear reader :).

Dax40.25 08 2022.

Before Before

RT Kick Off Notes

Dax is continuing its sequence of higher lows during the pre mkt session as are US mkts. In classic technical terms its beginning to look a little like a V shaped reversal after testing close to the 13000 psyche level. Same for the US after the S&P500 came close to the 4100 level. Its too early to run with that idea just yet but something to bear in mind - a fast short squeeze could initiate at any time. We are still big picture bearish but the short term context and the upside pa seems to be challenging that assumption for the moment. As I write Dax is pushing up to the 13300 level where we might get a bounce back at least initially. If 300 breaks to the upside 330 - 350 is the next R zone in play but the H1 structure is pretty clean (not much structure) between 350 and 450 so could initiate a fast move up to the 450 level. 450 is an important D1 level and could act as both a target and/or cap the upside at least for a time.

To the downside 230 - 240, around yesterday RTH highs, is important and 200 could be used as a bull bear zone which is now key to hold if this up push has legs. We don´t know what will happen so all we can do is follow the evolving pa and act logically (buying dips for now) unless we get a break lower which suggests that is not the case. Watch out for real and false breaks of these key levels.

As I illustrated above in the "After" chart of yesterdays close whatever the broader picture there are always pa pattern scalps to be had. Look out for trend lines, pullbacks, fibs, rounding and balancing pa to provide some scalp action during the day. Also watch out the H1 for wicks and body closes as we have been getting some good cues from hourly bodies balancing on a level with only wicks below (or above). These a useful indications on short term intent and used in conjunction with lower time frame pa give some good opportunities.

On the data front we German IFO at 10 CET and prelim US GDP at 2.30pm. The Jackson Hole annual central banker boondoggle kicks off today so be alert to any unscheduled comments on the wires. Think booze, strippers and a ready supply of stimulants to keep Jay Pow and his crew up to the task lol.

Best advice I or anyone can give you is to watch unfolding pa, take your shots at pre set levels and reference points and carry a big stick for when the stars align which in our case is where we get a confluence of reasons to enter. Have a good one :).

Dax40.26 08 2022.

Before After

Pre RTH Kick Off Notes

Before we get to todays charts a couple of quick points.

1 Visual clarity.

I know we all like to set up our charts in our own way. Its probably a format that we´ve played with many times and have eventually settled on a layout that we´re now comfortable with. It has likely become a routine / habit. However, its always worth a rethink from time to to time to make sure it gives us the information we need "at a glance" so we can react to price action with little lag between thought / set up and execution. I am a visual thinker as I have mentioned, and having chart information in presented in a manner which is clean and instant is very important to me. Subsequently I have little to nothing on my charts apart from my levels (admittedly there are many when you look at my Kick charts but that´s only because there´s no point in re doing every level every day as most are ´historical´ and they come back into play once price reaches up or down from where it might be now), and session delineation time markers. During the day I will add and subtract Fibs and other ref points as required. I also like to be able to see every time frame instantly without having to switch chart views/tabs etc. I have my M5 and M1 execution charts right in front of me and my M15, H1, H4 and D1 charts on another screen to my right. To my left I have my US markets open at all times for comparison marked up in exactly the same manner. In this way my eyes automatically follow a routine and habit that gives me a complete time view at all times and there is nothing that distracts me and causes any "visual dissonance" for want of a better word. They are clean, tidy, big enough to see, uncluttered and instantly informative.

For example I am always on the look out for 15m and H1 closes and candle formation. I often find that a doji 15m candle can be indicative of a decent short term move I may miss on my 5m execution chart. Similarly bodies and wicks on H1 are a good way to keep in synch with the intraday larger time frame context. A number of balanced H1 closes and or wick action is very informative.

I mention the above a) because having clean charts with only the information you´re interested in forms a visual habit, is easy on the eye and capable of being acted upon and b) because if you don´t have all time frames in view its very easy to misread what might be unfolding. As a scalper the lower time frames are my go to charts but I´m always mindful of what´s happening on the higher times frames!

Anyway - just a thought :).

2 Access to this page

I have given this information freely for over two months now (actually years on twitter) and I enjoy doing it and will continue to do so. However, it does cost me with regard to time. Consequently the only thing I ask of viewers is to have read my books. I have dropped a few polite hints suggesting this would be a considerate thing to do it its own right. My books stand alone regardless of whether you view my notes etc. They are written to show you how, what and why I read and trade the Dax40 and all other markets for that matter. Process, method and mindset are covered in great detail.

Some of you have already bought my book (s) and for that a big thank you - it is greatly appreciated. For those of you that haven´t and want to continue with access to this daily set ups page, from next week I will restrict access to only those who have at least bought my book of how to trade the Dax40. I have the emails of those who have purchased already and there will be a simple log in and nothing will change.

If you find use in what I do here, I think it is a small price to pay. Its up to you of course and I guess it will at least let me know whether I´m providing any value :).

Right back to todays charts.

As mentioned yesterday we are pressing the upside and continued to do so during yesterdays US session. We did have a pullback on Dax during the European morning ( more of an inventory correction play) but once the US were up and running the upside continued. Dax is currently as I write balancing at around the 13330 - 50 zone having formed a tight overnight range and the sequence of higher lows sits behind us. Yesterdays pcc lows at just above 200 keeps that intact. Indeed we could dip a bit lower to around 180 and still keep the upside price action in play.

To the upside we have a R zone at around 400 but as you can see from the chart above that there isn´t much H1 structure until we get to at least 455 - 475 with the former being a key D1 level. Note also the Fib on this price leg from 24th low to yesterdays high.

However the key to today and probably next week is that its the first full day of the Jackson Hole summit and we could form a holding patterns until 16.00 CET when Powell is due to speak. His comments from this meeting in the past have been highly anticipated and acted on by traders so keep an ear to the ground particularly if you are trading the US. We also have US PCE which as I´ve said before is a data point favoured by the Fed so watch out for that also at 2.30CET.

The S&P500 tagged the 4200 level at yesterdays US close. This is a key level for US markets with regards to what they may do next and subsequently (as Dax likes to follow in the main), what it will do next.

In conclusion for today we, as always, have our levels to act as our zone to zone trade guide and our price action read to rely on for scalp action set ups at and in between. For me its really about Powell´s speech at 16.00 that we need to be ready for any indication of what´s round the next corner re rates and monetary policy Stateside.

Whatever the price action we are still in bear market territory bigger picture and we had some Ifo comments yesterday again alluding to a possible German / European recession.

Whatever happens, we are still above 200 D1 ATR so there´s plenty of range to make money in. Have a good one:).

Post RTH Review

While we waited for the headline news event of the day, Powell´s comments from Jackson Hole, we essentially had 2 set ups. One was a sell from the previous days RTH high and a long from the opposite end of the range - yesterdays RTH low. Both levels were marked up on the kick off charts. There were a couple of opportunities to jump on the morning short, one when we saw it back inside the pre mkt range and the other when it broke 1st support came back up to the top of that zone and quickly broke back under it. This ran all the way to the prior days RTH lows, balanced at that level just above 200 and pushed back up.

We then were in wait for data and the US mode. When US PCE hit the wires with slightly better than expected numbers we could have jumped on the long from the bottom trade from around 275 - our earlier broken S zone targeting back into the pre mkt range. This was a trade I showed on Twitter. However, we then had some unscheduled news "ECB sources" suggesting some members were looking at a 75bps hike in Sept regardless of any looming recession concerns. This spooked the Dax and it quickly started to roll back down. Powell´s comments and US price action from important R levels (4200 in the S&P) did nothing to help that once he had spoken and we continued down the charts. We eventually ended the day lower by > 500 pts!

Could have been a great day for some but probably just a decent day for most as price action was a one or nothing opportunity i.e. you either took the mornings short and or long from the prior days low or you didn´t. binary opportunities in other words. There was plenty of headline risk and this may have kept many traders on the side lines. Not just news driven but also technically - especially in the US which has been driving this bear mkt rally. The ECB sources comments added fuel to the risk-off fire. Mondays and next week should provide us with more good opportunities as many traders get back to the desks after the summer recess. More on that next week.