DAX Fundamental Analysis – week of February 13, 2017

The DAX had an eventful week as it stayed within range but made sure that it traded the entire large range rather tha restricting itself to a tight range. But despite the decent volatility, we find that the index continues to be range bound and unable to make a break in either direction which has been the situation ever since the beginning of the year. In the meantime, the US stock indexes have gone on to make some record highs but the fact that the DAX has not even been able to make it to 12000 in this period of time, despite a strong German economy and good economic data, should be a matter of concern for the bulls.

Last week, during the early part, we saw the DAX move towards the support region in the 11400s as the repercussions of the previous week, where Trump had openly threatened Germany over the Euro, were felt and the index looked weak. But we had mentioned that we should be expecting a quick bounce in the index from the support region and thats what we saw as the dollar strengthened and the stock markets returned to a risk on mode after Trump revealed his ideas to give large tax cuts to corporates and the US citizens. This pushed the DAX back above 11600 and thats where it has closed at the end of the week.

Looking ahead to the coming week, we believe that the consolidation and the ranging is likely to continue going forward and the bulls are finding it increasingly difficult to continue the momentum from the last year. As time wears on, the bulls will be exposed to more global fears and risks that are likely to come along and this will put the bull run in serious question. It is advisable for the traders to stay out of this range market and wait for a range breakout in either direction before jumping into a trade.