The DAX Index continues to essentially follow in the wake of trading results from US equity markets. After last week’s early global nervousness, optimism has crept back into equity indices and has shown the ability to hold onto gains. Yesterday’s positive price action on global indices has produced a slight sell off early this morning, but this may prove a rather polite downward movement which is the result of short term profit-taking.
Support for the DAX Index remains rather sturdy near the 12985.000 juncture. Speculators need to understand the German index can move fast and its results are sometimes more volatile than its American counterparts because of the limited size of DAX Index which makes it more susceptible to corporate moves of individual stocks.
However, with a seeming expanse of risk appetite developing again, traders may not fear downward moves as much as they did last week. This doesn’t mean that downward moves won’t happen, but the short term trend certainly looks positive for speculators who can buy into the DAX Index with limit orders when the market trades a little lower and thus set the table for a potential reversal higher.
Resistance levels of 12200.000 are nearby and if this juncture is punctured higher and sustained the DAX Index may be setting the table for another test of record highs near term. Resistance has proven resilient up above and some traders may be skeptical of the ability for the German index to puncture levels of 13300.000 and challenge junctures even higher. However, as optimism reigns in the current global equity marketplace, it may prove the right decision to simply try and ride the trend higher.
Some financial analysts continue to point out that real price discovery is nearly impossible within the current economic cycle due to coronavirus and the chaos it has caused on world commerce. However, financial institutions continue to park the money they manage within equity indices because for many money managers it is the only ‘safe’ place they can claim that they were being careful with cash of their clients. In other words, following in the footsteps of financial institutions as they buy equities and indices like the DAX Index continues to make sense until proven otherwise.
DAX Index Short Term Outlook:
Current Resistance: 13290.000
Current Support: 12985.000
High Target: 13400.000
Low Target: 12900.000
