DAX Monthly Fundamental Forecast – October 2016

The DAX index, like most stock indexes around the world, spent the month of September in consolidation. There was no major driver for the stock markets and even the rate hike that a small section of the market was expecting didnt come to fruition and so the stock indexes around the world lost direction and spent their time in consolidation.

The DAX had a monthly high of 10780 and a low of 10180 and the action was restricted to this 600 point range for the whole of the month. Towards the end of the month, we had banking fears kindled as several rumors began to circulate in the market about the strength of the Deutsche bank and that it could be in trouble. This fear gripped the markets and caused the DAX to fall towards the end of the month. But, so far, they have just been rumors and it hasnt yet indicated any systemic problem as yet. And this cheered the markets again, brought the risk back and now it sits at 10530 to close the month.

Looking forward to October, there is not much in the way of market moving news and we could see some more consolidation this month as well. We are approaching the Presidential elections in the US, which are scheduled in November, and also rate hikes in the US, which many in the market expect to come in during December (though we believe that it will be only next year) and the approach of these 2 events could lead to some volatility in the markets in either direction depending on the events that unfold in the lead up.

As always, we advice traders to stick to trading the extremes, especially those who trade the stock markets as they are known to be very fickle and can be easily affected by even micro-events unlike the FX markets that are much bigger. We do specify the ranges to look out for in our daily forecasts and as long as traders stick to these ranges, they should be able to trade safely. With consolidation expected, it should be a good month for the range traders than the trend traders.