The DAX Index is mirroring other global indices as it embraces positive momentum and is within record high territory. Some speculators may be frightened by the higher values achieved on the DAX Index and look at long-term technical charts and point to similar highs made in February of 2020 just before the onslaught of coronavirus implications devastated the markets.
As January and the new year approach, troubles still simmer just beneath the surface in Germany, developing news regarding coronavirus variations are being digested and information about the rollout of vaccinations for citizens is still unfolding. However, risk appetite among investors and financial institutions appears to be strong and steady. And while valuations are scrutinized by analysts who continue to point to challenging earnings outlooks, the DAX Index is trading within sight of the 13800.00 region and remains attractive as a speculative buy.
The month of December certainly wasn’t easy for speculators of the DAX Index. Although the German index is hovering near record highs as of this writing, early mid-December saw the value of 13000.00 approached with strong bearish momentum after a reversal from the 13400.00 level failed to generate more buyers. Technically, the DAX remains an equities index which moves fast and is susceptible to gaps, and the sudden gyrations can be violent. The DAX Index is affected by global sentiment in a large way and it certainly reacts to results from US equity markets in what can be described as a large correlation via technical evidence.
However, the DAX Index also has national and European Union influences too, which are extremely important. As the month of January comes into focus, the new year could see a positive amount of momentum help push German equities higher based on the presumption that the newly agreed upon trade deal between the EU and UK will create a more stable environment regarding economic outlook. Also, the potential for a weaker EUR against the GBP may prove to be a positive lever for German exporters. While technical traders may not be interested in these considerations, financial institutions may find the thoughts useful.
Speculators contemplating buying the DAX Index at the current height being tested may feel that German equities are overvalued and a reversal lower could develop. However, wagering against the trend remains rather difficult when momentum continues to brush aside resistance levels. Traders who are inclined to sell the DAX Index and seek reversals lower should make sure they are using stop loss ratios which are relatively close.
If the 13800.00 to 13900.00 junctures are proven weak and upside action stays strong, traders should have no doubt that the 14000.00 mark could prove to be a vital psychological trading area. If this level is punctured higher and values are sustained above this figure, speculative buying may increase in January and create fast market conditions which may generate gaps. Speculators may be nervous as the DAX Index challenges new record highs, but if optimism builds among global investors as a change of leadership takes place in the US, traders should be prepared for speculative buying fever to build.
Conservative traders may want to wait for reversals lower before they buy the DAX Index as they seek ‘value’, but they risk missing out on the bullish trend which appears ready to burst into record high territory. Speculators should be careful regarding the amount of leverage they are using and practice their risk management wisely if they decide that buying the DAX Index is the appropriate road forward in January. The German index, from a long-term technical perception, may be ready to test new highs.
DAX Index Outlook for January:
- Speculative price range for DAX Index 13,200.00 to is 14,600.00.
- Support at 13450.00 could prove to be significant and if broken lower the DAX Index could see a test of lows near the 13200.00 mark if trading conditions worsen.
- Resistance levels at 13900.00 may prove tough, but if punctured higher and the key psychological 14000.00 mark is brushed aside, speculative momentum could test values between 14400.00 and 14600.00 abruptly.
