What’s inside:
- DAX starts year off with a bang
- Outlook remains bullish as long as Monday’s rally and late-December base holds
- Top-side levels remain in view
Last Wednesday, we discussed the likelihood of seeing higher prices to start the new year given the trend, lack of resistance when looking to the left on the charts, along with the probability of seeing fresh capital flows. On Monday, the DAX shot higher from the base formed to conclude the year, with the rally falling just shy yesterday of the August 2015 high at 11670.
The trend for the past month has been strongly higher, and with that it has been difficult to be anything but long, or flat at the least (meaning, no shorts). Top-side levels which remain in view for the near-term are the Aug ’15 swing high at 11670, the Jul ’15 high at 11802, and then the May ’15 high at 11920. On the weekly chart there is an upper parallel, which depending on when (if) it reaches it, comes in around 11800/900. (For more, see our Q1 equity forecast.)
As long as the base created during late-December holds up between 11400/80 and the big up day on Monday isn’t negated, the path of least resistance remains upward. There is a trend-line rising up off the 12/2 low, but in our book only minor in significance given the short time since it was first considered a trend-line (1/2 first swing low connecting to 12/2 low). So, a violation of this trend-line wouldn’t phase us much. It would require a break below 11400 to give pause to an upward bias and potentially reverse our view.
For now, we will run with the notion the market wants to acheive greater heights. How the market reacts upon tests of top-side levels, should they be met, will offer clues as to whether the rally wants to continue on or has run its course and at risk of a reversal.
DAX: Daily
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---Written by Paul Robinson, Market Analyst
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