DAX 30 Levels to Aim Beyond Next Weeks ECB Meeting

2015-11-27 11:22:00

Alejandro Zambrano, Market Analyst

Talking Points

The DAX looks to finish with yet another week of gains and will most likely be supported as we head towards next Thursday’s ECB meeting.
The three to five day trend is bullish above this week’s low of 10,866.

The DAX 30’s three to five day trend is bullish above this week’s low of 10,866. This means that any corrective move, either today or early next week, towards 10,866 will probably be seen as a buying opportunity because as long as the DAX 30 trades above the weekly low of 10,866, we may actually reach the August high of 11,672.

I am for now considering both the August high and the close of July high, (which came in at 11,800) as strong resistance. It would also be fair to expect some kind of reaction to the ECB meeting, as traders previously went long on the DAX when hopes of a new stimulus were projected on October 22, and at that time it was trading near 10,200. Hence, we could be heading towards a ‘buy the rumor but sell the fact’ scenario.

However, as long as we don’t break this week’s low of 10,866, I am expecting the DAX to break the August and July highs at one point over the next 1 to 3 months.

If this would happen we may reach the 2015 high of 12,375 in the first or second quarter of 2016.

Macro data Supports Gains

The reason for this upbeat outlook is primarily due to all the positive growth indicators from the last month as shown by the German ZEW Index, U.S. and European PMI readings.

German ZEW expectations rose to 10.4 vs. the 6 expected (Bloomberg poll).
German IFO index printed 109 vs. a survey expecting the outcome of 108.2.
Eurozone Mfg. PMI and Services PMI increased from prior months and beat economists’ expectations by printing 52.8 from 52.3 and 54.6 from 54.1 respectively.
U.S. Markit Service PMI 56.5 vs. est. 55.1

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