The DAX 30 looks poised to trade higher in the days ahead, generating a classic Christmas rally.
I turn bullish on a break to the December 17 high of 10,832. In this scenario I see the DAX index reaching the psychological level of 11,000 and then the December 3 high at 10,322. Short-term traders will probably place stop loss orders below the December 24 low of 10,621, alternatively 10,395 if the DAX indeed breaks the 10,832 high.
For the trend to turn bearish it’s likely a break to the December 22 low at 10,395 is needed. At this point there is nothing in particular which is fueling the rally, rather we suspect that seasonality patterns are lifting prices. We note that the FTSE 100 turned bullish already last week, hence the DAX 30 is still in catch-up mode.
Next week the trend of the DAX 30 will be tested as the crucial ISM Manufacturing and U.S. Markit PMI manufacturing are on tap. Given the weakness in the manufacturing sector and risks of a U.S recession on the back of this sector, better than expected PMI/ISM indices will be crucial for stock market traders to remain upbeat.
Today U.S. house price index is on tap. A Bloomberg News survey projects house prices to have increased by 5.6% YoY in 20 major metropolitan areas of the U.S.A. This would be in line with the developments of the last 12 months.
DAX 30 / GER30
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
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