Late last week we outlined how fast the European indices DAX and Euro Stoxx 50 had declined. We wrote:
DAX is down 5.3% in 8 sessions. Pushing a break down below these support levels is probably tempting for the shorts, but we wouldn’t be surprised to see another reversal just when it feels the most bearish.
We are seeing exactly that reversal take place today. One day up doesn’t make a trend, but it would be the classical pattern of frustrating shorts once again having to realize the market is not breaking down.
DAX is currently bouncing above the huge 12k level. If this holds here, a squeeze move higher could be rather violent.
Euro Stoxx 50 briefly traded below the huge 3300 level on Friday but is today back above it. Shorting mean reverting indices, that trade without a clear big trend, on huge supports can be an unpleasant experience. Let’s see how Europe closes today, but a close here or higher can spark a squeezy bounce.
One of the stronger candles today is found among the European banks. What many saw as a break down on Friday is today a violent squeeze reversal. 105 is very big and important.