Dow Jones and Dax: Markets correction consequences

Last Friday alleged fraud accusations against Goldman Sachs brought about a significant correction in the Stock Markets, whose technical consequences have differed if we compare both North American and European main securities Indexes.

For instance, the most representative German Index, the Dax, has experienced a short-term scenario change towards a more bearish situation. In fact, its accelerating line is beginning to undergo a bearish pressure increase. As a result, its rising structure can be seriously damaged. The significant decrease that European Stocks suffered last week was, on the one hand, the result from a evident overbought situation that technical indicators had begun to show and, on the other, an excuse that investors had been looking for during the last sessions to make a profit-taking movement.

So far, it´s unclear which the extend of the correction could be. It will depend on the 6.140 support resilience. If it eventually can´t withstand the selling pressure, the accelerating trend will be considered as definitely lost. In that case, the decrease goal would be its primary rising trend, which passes by the level of 5.900 - 5.750 points. By contrast, if it concentrates enough buying interest, its short-term rising structure could be re-built again.

The recommendation is to close the long strategy if prices finally break the support of 6.140 points. Stop loss in 6.300 points.

The Dow Jones has demonstrated so far a healthier situation that European indexes. In fact, the 14% decline that the aforementioned banking investment firm underwent on Friday didn´t interrupt the rising movement that the most popular North American Index has been carried out since the beginning of February.

However, the fall was so abrupt, that a more intense falling technical movement could be unleashed in the coming sessions. To assess the likelihood of such a significant fall is very important to watch over the level of 10.950 points (whose role is absolutely key)  and secondly, the support of 10.850 points (by far less significant, although it should theoretically be more resilient).

The recommendation is to open short positions if prices break the level of 10.800 points. Stop loss in 11.150 points.