S&P 500, DAX, CAD/CHF Technical Analysis: Triangle Favors the Sellers

In our analysis on Friday we mentioned an interesting symmetric triangle pattern that emerged on the charts of both the DAX and the SP500. Back then, we were inside of those patterns, waiting for a breakout, which in theory was about to show us a proper direction. The breakouts did happen and, in both cases, were to the downside, which is rather negative information for stock traders.

Let’s start with the DAX, which indeed broke the lower line of the tringle on Friday but it did not cause a huge reversal on Monday. Actually, we are starting the new week positively and the price is trying to move a little higher however, I wouldn’t get too optimistic. From a technical point of view this is no more than a broken support being tested as a closest resistance. As long as the price stays below the resistance, sentiment is negative. Only a comeback to the inside of the triangle would be a strong buy signal.

The same thing is happening on the SP500 but let’s say that buyers are less enthusiastic about this rise. Well, maybe it’s because Americans are still asleep. Nevertheless, as long as the price stays below the lower line of the triangle, sentiment is negative.

About the triangle, I would like to show you the CADCHF pair. On the pair’s chart you can see how reliable the triangles are. In February, we had a breakout to the downside, followed by a huge slide. Then a correction (flag), which ended on two important Fibonacci resistances. In the middle of June, the price broke the lower line of the flag, which reopened a sell signal for us, that sell signal had originated when breaking from the triangle mentioned above. Sentiment here is negative.

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