DAX Down 0.65% NVIDIA Correction – ECB Policy Take Front Seat

The Frankfurt stock exchange index declined sharply today on the heals of a pullback in NVIDIA stocks and concerns of a delay in ECB action.

The US tech giant NVIDIA has been correcting its bullish trend over the past 3 days and brought the broad stock index, Nasdaq, down with it. Other markets have followed suit in what some are referring to as a Cisco moment.

While others claim that the AI revolution will bring about sustained growth, not only for the main AI player, but for the broader market also. Thee DAX had been climbing on the back of the AI surge, but also in view of a dovish ECB.

The sentiment that the ECB might act quickly in loosening monetary policy began to fade when the Fed put the brakes on. The perception that the ECB could lead in interest rate cuts is hard to hold.

Mainly because it rarely happens. And after the last ECB meeting the market had to come to terms with an ECB that would put any further easing on hold. Interest rate concerns and falling tech stocks are driving the market for now.

Technical View

The day chart below for the DAX shows a market in a sideways trend that started 7 sessions ago. The market tried to break below the Ichimoku cloud, but the attempt failed. The market is trading against the resistance of the cloud showing clear uncertainty in the next trend.

For a breakout to the downside to be complete we would need to see the lagging line (purple) from the Ichimoku system below the cloud. That would also coincide with a close below the closest support at 17,939 and 17,912 (dark and light green lines).

If this scenario arises, the next support is at the previous low of 17,419 (orange line). To the upside, the closest resistance is at 18,283 (blue line), and after that the top side of the cloud.

Should the market break those levels the next resistance are at 18,601 (black line) and then the all-time high of 18,911 (red line).

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Gino Bruno D'Alessio
Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.
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