a weekly price action market recap and outlook - dax

Good evening and i hope you are well.

I let my thoughts go wild this week so have my tl;dr here:

tl;dr: IMO this is the end of the long ongoing bull trend we had and the climactic moves at the end are not as rare as many think. That does not help you with shorts right now. Scalp long where big or many consecutive bull bars appear and wait for bears to show up again. I think we are very close to the end. Do. Not. Short. Yet.

For the people who bear my writing… I dare you to find me an extremer example of a more climactic move at the end of a long ongoing trend than this one. US markets have reasonable trend lines and channels which they respect but the dax is just in a parabolic up move without stopping. Which makes me think everyone and their dog was/is short and covering, fueling the fire. But i will die on that hill, that this is the end of the bull trend and not the beginning of a new one. I called the -30% (at least) drop for this year and i stick to that.

I try to keep to price action for my trading as much as i can and most macro news are not affecting the market as most people think they do. Now comes the but. I live in Germany and we are in an economic downtrend with very high rates compared to the last 14 years. Find someone which company says they are hiring extensively and outlooks are raised. DM me then please.

Markets are a casino in the short term but Macroeconomics (i like to call it macro schmackro) will catch up eventually. It always has and always will. One very clear indicator, which everyone knows and rarely listens to are people around you after a trend has been going on for quite some time. Goes as follows:

You hear colleagues, neighbors, granny and your dead dog talking about markets only going ti*ts up and options are the name of the game. Crypto is yes yes yes buybuybuy. Then you look at the chart and see that it has been going up for a long long time. That’s where these trends end. Something news worthy will come up on the horizon and you can be sure many people who will lose their savings, pension and whatnot over the next 2 years. This was and always will be a boom bust cycle. The bust probably does not go below some pre-bust levels but it will bust as it always has.

Does that mean i call to short this and the high is in? Well, i thought the late December price action formed a credible top but on the weekly it was a rather small pullback. You simply can’t short into this if you can’t take the pain. Markets are giving no signal that the highs are in, so you should scalp long and wait for markets to become more two sided.

dax
Quote from last week:

bull case: Bulls probably want to touch that big green bull trend line at around 17500 which is pretty far fetched imo. Market is still not accepting anything above 17100 and bulls took profits going into the weekend.

I think the low probability breakout above happened and trapped many traders who sold everything above 17100, which worked since mid December. Probably exhaustion but bears need to prove that early next week.

bull case: Bulls closed the week very bullish and even if all targets are met and they are at multiple upper trend lines, they can just continue the pump, there is no denying that. I know i keep repeating myself. Risk reward for buying up here is bad but if there is no selling pressure, the probability is on the bull side and every trade is a trade-off between risk, reward and probability. Next target for bulls can be 17500, 18000.

bear case: Easier to have bear targets but bears have done nothing this week so everything i write here is low probability and you should only look for these targets when bears clearly show strength and making lower highs and lower lows. First target is a 1h close below Fridays open 17442 and the 1h 20ema is around there too. 17400 was tested multiple times on Friday and i think we could range there first. For the very low probability of a big sign of strength by the bears and a sell-off below 17380, next would be the uber monster bullish gap 17160 which is also my thesis for the exhaustion gap. My bearish thesis only lives if we close the next week below 17000 because the monthly close is the most important thing now for bears. If bulls close above 17400, it is a clear buy signal for higher time frame traders/algo's and it means acceptance. We had two daily closes above my invalidation target and if bulls can keep this gap open, we see higher prices.

outlook last week: “sideways to up is the high probability but bad r:r trade. if bears get a strong beginning of the week, my exhaustion thesis might be correct and we drop below 17000 again.”

→ Last Sunday we traded 17461 and now we are at 17775. i said sideways to up but it was only up. not the worst outlook but the extend of the up can only be surprising to anyone

short term: neutral is the only reasonable thing here. after so many buy climaxes without more pullback, the odds of continuation drop to almost impossible. does that mean we go down from here? hell no. it’s just very low probability that this can continue without a meaningful pullback. but these things happen and they can go on for longer than most can stay solvent. if bears won’t shop up, scalp long where bulls show strength.

medium-long term: the weekly chart gives nothing but bullishness so higher prices are expected. my long term outlook stays bearish and i expect at least a -30% correction in 2024.

I have drawn 2 possible paths and the bearish one is the one i think will play out. maybe not time-wise but price-wise.