DE30 tumbles below 13000 on geopolitical concerns

Summary:

• Escalating Middle Eastern tensions weigh on stocks

• DE30 falls below psychological 13000 level 

• Bearish 8/21 EMA cross seen on D1

Despite some mildly positive data from Germany this morning, the DE30 has gotten off on the wrong foot at the start of the new week with the market tumbling by as much as 1.6%. Similar to Friday’s session the declines come from geopolitical tensions in the Middle East with a further escalation over the weekend weighing on risk sentiment. Iranian president Hassan Rouhani has said that he will no longer seek to restore the JCPOA nuclear deal, marking a further deterioration in relations between Tehran and the West.

The DE30 has tumbled by around 500 points since the drone strike which killed Iranian general Soleimani, with price putting in a double top around 13460 and now trading not too far from the December low of 12881. Source: xStation

With US president Trump doubling down on his threatening rhetoric overnight on Twitter, there’s a real concern that things could get a whole lot worse before they get better and Oil has moved up to its highest level since May in recent trade. Those trading the DE30 could be interested in keeping an eye on crude, given that the oil market seems to be the most sensitive proxy of tensions in the Middle East and therefore could guide sentiment in indices. 

The DE30 has exhibited an inverse correlation with Oil since the attack on Friday, and indices traders may want to keep a close eye on crude as a proxy for market sentiment regarding Middle Eastern tensions. Source: xStation

The final German services PMI for December came in markedly better than expected, with a reading of 52.9 comfortably above the 52.0 consensus forecast (prior also 52.0). This is of secondary importance compared to the geopolitical tensions but the DE30 has shown signs of some buying pressure supporting price since its release.   

From a technical point of view there are a couple of signs that the DE30 may be turning lower on a D1 timeframe. Firstly, Friday’s session saw a large bearish engulfing candle confirmed as price closed beneath both the 8 and 21 EMAs for the 2nd time in 3 sessions. Perhaps even more importantly, the 8 EMA is now threatening to move below the 21 and a bearish cross here could be seen as signalling the end of the uptrend that has been in place since the start of October. 

The DE30 is on the verge of printing a bearish cross in the 8/21 EMAs which could be seen as signalling a change in the prevailing trend. Friday's session also saw a large bearish engulfing candle confirmed on D1. Source; xStation