Dax: First weakness, then recovery

The Dax is currently, unlike the US indices, hesitant on the road. On Friday the supposed eruption, then down again – but this downward movement has more corrective character, and is anything but impulsive. The X-Dax certainly starts with slight weakness.

The chart clearly shows that the German leading index shot up impulsively since it was able to defend the support zone again at 12840/50. Then followed an upward gap and the alleged breakout from the sideways range with the break of the 13200 resistance, since the index dribbles down. But this downward movement may not really convince, it lacks momentum. Therefore, we expect the next move to go back up, with a buy signal if the Dax could break a zone at 13200/13210 again!

Basically, the Dax has catching up again after the US indices were stronger again yesterday, especially the Nasdaq, on which the Dax had recently oriented more and more. Today a reason is missing, a motivation for further weakness in the Dax. We are waiting for the Fed and the ECB, so we can´t anticipate very large moves in advance, but we nevertheless expect a moderate recovery, which will reduce the gap to the US markets somewhat.

Somehow everything is waiting in the pipeline: Waiting for the outcome of the senatorial election in Alabama, waiting to see if the Fed reacts to the very likely US tax reform, perhaps even expecting four rate hikes in 2018 for the dot plots, and waiting for the ECB. The Dax got the last really big boost from Draghi’s statements at the last press conference, and it’s not unlikely that Draghi will cause a similar effect on Thursday with very dovish statements! Therefore, in the short time frame, we expect weakness in the euro.

Already in the morning trade it can be seen today that there is more momentum than yesterday. This will increase as the week progresses, as the big players in the market place their chips at the table for the last time before many will close the books. It is above all the Americans who want to end the year with new records. The Dax, however, shows its sunny side between mid and late December in good regularity. It would not be a too big surprise if it would come this time again ..

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