DAX Daily Fundamental Forecast – October 20, 2016

Stocks markets in the Euro region generally had a rigid and strong day with most of the indexes ending up green though not by much. The same can be said of DAX which ended up by about 0.2% which can be viewed more as a result of consolidation rather than any specific upmove. We had mentioned in our forecast yesterday that we do not expect much of moves in the stock market yesterday and for the next few days as there is no specific impetus in any specific direction and the DAX and other indexes would continue to move aimlessly looking for direction.

Also, with many stock market indexes near their highs, the bulls are wary of pushing it further as they do not want to wake up the bears from their slumber and risk being put down. So, what we see is a consolidation at the highs as the DAX broken through 10600 and made an attempt at the highs at 10680 but couldnt sustain the momentum and it sits at 10632 as of this writing. As we have been repeating over the past several days, the bulls really need to wait for a clean break of 10700 for them to start buying aggressively again and till that happens they will be wary at these levels.

The markets expect a rate hike in the US in December and if and when it happens, it will be a dampener on the stock markets around the world as the funds will get pulled out of stocks and move into the US and USD. But it is as yet unclear on when the rate hike will happen and with other risk events like Brexit and the Chinese economy floating around, we do not expect the bulls to make a big push in the DAX as yet. It is more likely to be a cagey kind of trading in this consolidation phase. We continue to advise our users to use any kind of approach towards 10700 as an opportunity to go short with a tight stop loss beyond 10700.