DAX Daily Fundamental Forecast – October 13, 2016

It was a day of consolidation for the DAX as the bulls licked their wounds and tried to prepare themselves for another confrontation with the bears. We had mentioned in our forecast yesterday that the DAX is likely to consolidate with a bearish bias and look towards 10280 in the short term and we saw yesterday that the index was trading with a bearish bias. There has been a general risk off mood in markets around the world and this was reflected in the DAX as well as it consolidated between 10500 and 10600 for the whole of yesterday.

Looking ahead for today, we have seen the SP500 drop quite a bit on the risk off theme and the SP500 continues to drop even after close as the theme continues. Today morning also saw the release of trade balance from China which showed a big drop in the exports. This showed the Chinese economy in poor light and increased the risk on the overall strength of the Chinese economy and as a result the global markets dropped even further as the yen strengthened. This is likely to carry on during the Euro session as well and we believe that DAX will have a bearish day today taking a cue from the global markets. The index sits at 10547 as of this writing as we await the DAX open.

There are no major economic releases scheduled to be released from the Euro region for today and so the index is likely to affected by events and flows during the day. We continue to be bearish on the DAX and continue to expect a visit to 10280 as long as 10700 holds. Only a break of 10700 would signal a new bullish run. Till then, look for resistance regions at around 10580  and 10660 to initiate sells. If you are not confident of the sells, do not enter the market in any direction and wait for a break of 10700 to go long. As said earlier, a buy at these levels looks too risky and is not worth the returns.