DAX Index Fundamental Analysis – week of October 2, 2017

After few weeks of consolidation and ranging, the DAX index finally gathered some momentum to move break through the trading range of the last few weeks and move higher to be in sync with the global markets. Now the index is likely to challenge the previous highs that we saw a couple of months ago and this should then lead to an interesting battle between the bulls and the bears.

DAX Index Finally Breaks Out

The index had been lagging many of the global indexes mainly due to the couple of reasons. One of it was the fact that the QE tapering had been weighing on many of the European indexes as this would have meant that a lot of funds would now be withdrawn from the markets. This led to a kind of uncertainty among the investors who refused to invest unless the picture cleared up. The other reason were the German elections which were held on September 24. Though it was well known that Merkel would win, it turned out that she did not get the required majority to form a government of her own and this also weighed on the markets as politics always brings uncertainty into the markets.

For long, these reasons caused a lot of uncertainty in the index which then forced it to respond a little slower to the global bullish cues. Over the past week, we have had positive signals as far as the Germany economy is concerned as we are seeing increased cooperation between France and Germany which is likely to be beneficial for both. We are also seeing signs of government formation in Germany and these kinds of reassuring signs has been helping the DAX index to move higher over the last week as it broke through 12500 and ended the week above 12800.

Looking ahead to the coming week, we are also likely to see the index continue to trade in a bullish manner. The bulls should be feeling happy that the DAX index is finally responding to the bullish cues and moving higher and would hope to carry it further in the short run. Any sort of correction is likely to be held by the 12550 region.