DAX Index Fundamental Analysis – week of October 30, 2017

The DAX index finally managed to free itself from the 13000 region and move higher during the course of the week as it was helped by the ECB in this process. We had specified in our forecast last week that this week could be crucial for the DAX as it was likely to determine the short term direction for the index and this seems to have come true.

DAX Index Breaks Free

We had talked about the importance of the past week as it not only had the announcement from the ECB regarding the QE but it was the third week of ranging and consolidation in the index, something that the index is not used to and such consolidation at such high ranges were likely to bring in trouble for the bulls. This exposed the bulls to profit taking from the investors as they begin to get tired and look elsewhere for better returns and this was another reason why we had said that the bulls had to move quickly and push through the 13000 region and make the move stick as well.

They managed to do that last week as the ECB announced an extension of its QE program. Though the ECB did cut down on the QE, the market was expecting a timeline for the full tapering of the QE and the fact that they instead chose to extend it to 2018 as well served as a disappointment for the euro currency but one of happiness for the DAX bulls as it meant that the funds would still be pushed in by the ECB into the markets as part of the QE program. This helped the DAX to break free of the 13000 region and close the week above 13200 with 13500 as the next target.

Looking ahead to the coming week, we do not have any major news from Germany or the Eurozone and hence we are likely to see the effects of the ECB announcement continue to dominate the DAX index in the upcoming week.