DAX 30: Durable Goods Orders To Stir the Pot?

2015-12-23 09:10:00

Alejandro Zambrano, Market Analyst

Talking Points

DAX 30 volatility might pick as U.S. Durable goods orders are on tap
Price action remains sideways in the 10,392 to 10,832 range - traders are most likely waiting for a breakout

The DAX 30 remains trendless and is now trapped in the 10,392 to 10,832 range. Traders waiting the traditional Christmas rally would like to see a break to the upper end of this range. In this scenario the DAX may reach the Dec 7 high of 10,992 and 11,250 in case of an extension. A potential trigger for such a bullish breakout may be today’s U.S Durable goods orders.

A Bloomberg economist poll anticipates an outcome of -0.6% MoM from 2.9% in October. A higher than expected reading might be what is needed for the index to turn bullish. If the reading is lower than expected we may see a break to yesterday’s low of 10,391, in this scenario a decline to last week’s low of 10,120 is possible.

Other data on deck is U.S. PCE inflation reading. It’s a key reading for the FED and we would need higher readings to justify it projected rate hikes in 2016. With this in mind, a higher reading than expected may boost U.S. short-term interest rates which may be stock market negative (as higher short-term rates may shift money from stocks to bonds, and limit corporate profitability).

A Bloomberg survey projects headline PCE for November to print 0.4% YoY, while the Core reading is expected to print 1.3% YoY. For a complete list of today’s economic indicators please see our economic calendar.

DAX 30 / GER 30

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

How the S&P 500 May Influence the DAX 30

In the weekly chart seen below the S&P 500 has traded sideways since the end of 2014. The 1817 low acted as support in November 2014 and August 2015, while 2136 acts as resistance.

With the S&P 500 is trading sideways we note that most of the reversals occur at the extremes of the 1817 to 2136 range. With this in mind it would be fair to expect traders to be interested in buying near 1900 (lower end of the range) and not the 2000 level as they did last week. This will ensure that the Risk-Reward ratio remains favourable as outlined in the guide Traits of Successful Traders Guide. With this in mind I don’t expect the S&P 500 help the DAX to trade higher, instead it may drag it down.

S&P 500 / SPX 500