The German DAX has remained bid over the last week and we don’t expect any major change to this theme until we get a catalyst which triggers an end to this short-term trend. Until this happens, the index may easily drift higher each day as is quite common during a bull market.
For the technical trend to turn bearish we will still focus on the 10,680 low (see chart below). Whilst intra-day scalpers may use yesterday’s low of 10,883 as a base for long positions, we doubt it will be a game changer if this level is broken. Hence, we will focus on the more important 10,680 level. Market participants are expected to keep on buying dips and we find the 10,680 – 10,844 range as a potential range for the price to find support. We maintain 11,160 as our one to two week target. If we break the trend, I would expect bullish traders to head for the exit.
Potential Catalysts: U.S. ISM Non-Manufacturing and ADP
Two key reports are on tap, starting with the U.S. ADP report at 13:15 GMT. The Bloomberg News consensus is expecting an outcome of 180,000. A surprising drop may trigger expectations of a softer U.S. NFP this Friday. I do personally not place much emphasis on this indicator, but the market does. More importantly and a somewhat better reflection of the state of the U.S. Economy is the U.S. ISM Services (15:00 GMT). The index dropped from 60.3 in July to 56.9 in October and economists expect an outcome of 56.5, this the outcome which will ideally match expectations to not disrupt the bullish trend. I am now looking for big misses to discourage traders and investors from participating in this ECB QE fueled DAX Rally.
The biggest gain over the last week has been in the healthcare sector, the median stock being up by 6.16% over the week. The biggest drag has been consumer services with the median share being lower by 3.79%.
Upcoming Risk Events (GMT)
- 09:00 Markit Eurozone Services PMI (Final), est. 54.2
- 09:30 Markit/CIPS UK Services PMI, est. 54.5
- 10:00 E.U. PPI, est.-3.3% YoY
- 13:15 U.S. ADP Employment Change, est. 180k
- 13:30 U.S. Trade Balance, est. -$41b
- 14:45 U.S. Markit US Services PMI (Final), est. 54.5
- 15:00 U.S. ISM Non-Manf. Composite, est. 56.5
DAX: No Change In Market Behaviour As Long As The 10,680 Is Being Respected
--- Written by Alejandro Zambrano, Market Analyst
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