- DAX holding up well after breakout above the 12300-area
- CAC continues to grind higher following bull-flag breakout
- Both looking for higher prices, will require sharps breaks to undermine outlook
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The last time we looked at the DAX it was only a day removed from breaking out above the 12300-area which held it underwater for much of the summer. Since then, it’s gone into a slightly upwardly sloping range. From the standpoint of holding the rally since the 8/29 low it’s a bullish development. The next level of solid resistance comes in around the July peak at 12676, or about 110 points from the current level. It’s not a stretch to think the market can’t get there soon. More broadly speaking, as long as the area surrounding 12300 holds on any weakness, the market will retain a neutral to bullish posturing.
The CAC is positioned even more positively after breaking above the top-side trend-line of the channel (bull-flag) dating back to the Macron victory in the French presidential election. The euro had the index in its grips as it continued to rally, but the breakout early last week out of the bull-flag puts the French market on path for higher prices. The first level of concern to overcome was breached yesterday, which came by way of the August swing-high at 5231. The next level of resistance before finding some separation arrives at 5259. Beyond there the CAC will have some breathing room up to around 5323/39. A strong break lower beneath the top-side trend-line of the bull-flag will be required to truly undermine a bullish outlook.
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Volatility heads up: Today is the FOMC meeting and depending on the outcome and size of the reaction by U.S. markets we may see gaps on the open tomorrow morning.
---Written by Paul Robinson, Market Analyst
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