DAX Forecast July 29, 2016, Technical Analysis

The German index initially rallied during the day on Thursday, pressing against the €10,400 level. However, we ended up turning back around to form a shooting star which of course is somewhat negative. That means that we will more than likely try to pull back from here, but I think that there is more than enough bullish pressure underneath to continue pushing this market higher. When you look at this chart, you can see there is a lot of noise between here and €10,000, so I believe that it’s only matter time before the buyers return between here and there.

There is also the possibility that we break above the top of the shooting star, which is extensively means clearing the €10,400 level. With this being the case, the market will more than likely continue to grind its way and perhaps even run all the way to the €10,800 level. That’s an area of significant resistance, but I believe that a break out above this recent resistance of the €10,400 region is a longer-term signal so I think we could go even higher than that.

At this point, I believe that the €10,000 level low is essentially the “floor” in this marketplace, and I do not expect to break down below there. If we did, that would be very concerning for the buyers, but having said that it still is within the consolidation area that we have been in for some time. Ultimately, I do believe that the DAX will continue to strengthen due to the fact that the Euro is falling in value, and of course the DAX is full of exporting companies. With this, the market seems to prefer the idea of lower currencies and of course low interest rates as bonds are actually yielding negative returns at this point in time. With this, stocks should continue to go higher but I do have to admit longer-term I’m a bit concerned about the growth picture. At this point though, it appears that the big money is flowing into the DAX, so at this point in time is a most impossible to sell.