Sentiment worsened on Monday, sending stocks lower during the EU session. At the time of writing, US equity futures were down more than half a percent, while EU bourses were even weaker.
No macro news today
The macro calendar is relatively empty today – typical for Mondays. In the EU, the Sentix investor confidence index declined to 16.9 in October, down from 19.6 in September , suggesting there might not be any autumn economic revival in the eurozone. The index declined to six-month lows and marked the third straight monthly decline. Additionally, the expectations subindex fell to 8.0 from 9.0, dropping for the fifth month in a row to hit its lowest level since May 2020.
Additionally, the European Central Bank Vice President Luis de Guindos said Monday that the central bank would decide on the Pandemic Emergency Purchases Programme (PEPP) alternatives in December if needed.
Monetary policy will remain accommodative, but the goal is price stability. Expects inflation to keep rising for the next 2-3 months, Sees factors pushing up inflation fading in 2022,
The EUR/USD pair has dropped notably, but it failed to support the DAX index. That is somewhat strange, considering there is usually a negative correlation between the euro and the DAX index (weaker euro typically leads to a stronger DAX and vice versa).
Technical situation starting to look bad
The index is dropping toward the critical support near 15,040 EUR, where previous lows are located. The support has been already tested several times, and bulls have always managed to defend it. However, since rallies from this support have been mild, it looks like we could ultimately see a breakdown below the support.
Large stop-losses should be hit in that scenario, potentially pushing the index further lower in the initial reaction, targeting 14,830 EUR and changing the medium-term outlook to bearish. The 50-day moving average is starting to slope downwards, and the index has been trading below it for several weeks. Additionally, **the RSI indicator is still far from oversold levels – supporting another leg lower. **
Alternatively, bulls need to push the index above 15,400 EUR to cancel the immediate bearish threat. Another level to watch will be at 15,630 EUR, where the 50-day average is located.