DAX 30 Remains Soft on Caixin PMI Services, ISM on Tap

January 06, 2016 at 05:10 am EST

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Talking Points

DAX remains bearish below yesterday’s high of 10,403 on soft Caixin China PMI Services and news of North-Korea announcing the testing of a hydrogen bomb
U.S. ISM Non-Manufacturing and U.S. ADP are on tap today. A good ISM Non-Manufacturing report is needed in order to soften the impact of this week’s bearish news

The DAX 30 is lower by 1.28% this morning and will remain bearish as long as price trades below yesterday’s high of 10,403. The next level of support and target for bearish traders is the December 14 low of 10,122. Following a successful break to this level, the price may reach the psychological level of 10,000, however, it could be argued that its first stop would likely be at 9885 were true support to be found, hence the price may slide further than 10,000.

The price would need to breach yesterday’s high of 10,403 for the short-term trend to turn bullish. In this scenario the DAX 30 may reach 10,621.

Adding to the bearish bias this morning is news of Chinese data along with activity in North-Korea. Firstly, the Caixin China PMI Services slipped to 50.2 from 51.2, a level very close to the multi-year low of 2014, which was at 50. This in concert with the Manufacturing PMI highlights that China is not out of the woods just yet.

Secondly, North-Korea announced that it had tested a hydrogen bomb, with the news coming after tremors at a magnitude of 5.1 were detected near the Punggye-ri nuclear test site. It will probably take weeks before this can be confirmed by independent sources but nevertheless, more geopolitical tension is not helpful to an already beaten DAX 30.

How do you know if a trade is good or not? You could use the risk-reward ratio as outlined in the The Traits of Successful Traders Guide.

Data on Tap

Today’s interesting data reports will be U.S. ISM Non-Manufacturing and U.S. ADP. Whilst more data is on tap, the novelty today are these two indicators. See our economic calendar.

The ISM Non-Manufacturing is expected to reach 56 from 55.9, and the reaching of its 56 target or beating it would be welcomed for the DAX given that the ISM-Manufacturing, published earlier this week, indicates industrial production is contracting. The ADP report is expected to reach 198K and gives us an idea of what to expect at this Friday’s NFP report. The ADP report itself is volatile, hence a strong deviation from the 198K may well be expected and a subsequent reaction triggered.

The expected outcomes in this report have been sourced from Bloomberg News.

FTSE 100 (UK100)