DAX Index Fundamental Analysis – week of May 28, 2018

It was a very volatile last week for the DAX index as the bulls struggled to hold on to their gains over the past week. But for those who had been following the index closely, it was not much of a surprise as we had been warning in many of our forecasts about the impending correction.

DAX Choppy

As the index neared the 13000 region, we had pointed out to the fact of how the index was approaching a region of strong selling and even though the bulls has managed to push the stocks higher, it is unlikely to sustain the move considering the selling that they were likely to face. Only one spark was needed too reverse the move higher, that we had seen in the first part of the week, and that came in the form of increased geopolitical tension which affected and pushed down the stock indices all around the globe.

Over the last few weeks, there was hope of growing peace in the Korean region as the leaders of North and South Korea met and shared ideas and talks and this had led to a risk on mode in the markets which helped the major indices higher. But last week, we saw that the scheduled summit between Trump and the North Korean leader was cancelled and this led the markets into a risk off mode which led to a bearish attack on the major stock indices and the DAX was no exception as it crashed from the 13200 region to below the 12800 region for a brief while.

Though the index has since managed to recover from below the 12800 region to trade just short of the 13000 region on the back of some bottom fishing, we believe that we may see some consolidation and ranging in the coming week. The bulls had used the move lower to pick up some stock at cheap prices and this is likely to lead to a period of accumulation in the markets in the coming week. We believe that the bulls are still in control of the DAX and hence we can view this period as a period of accumulation for the next move higher.