German index rallies for the week, breaking above resistance

The German index rallied during the week, slicing through the €12,750 level, showing signs of strength as we continued to go higher, and I think that we will probably break towards the top of the overall consolidation range that we had previously been in, meaning that we should go looking towards the €13,600 level over the longer term. Ultimately, I think that every time we pull back it’s very likely that we will get value hunters coming into this market. The hammer that we had formed during the previous week that find buyers near the €12,300 level should continue to keep the market afloat, and therefore I have no interest in shorting this market.

I believe that the €12,000 level is essentially the “floor” in the market, and that eventually we will break above the €13,600 level and then continue to go even higher. I have a longer-term target of €15,000, but obviously that is going to take quite a while to get to. I think that the occasional pullback will offer value, but investors will continue to like buying the DAX. Part of the bullish pressure of course has been the EUR/USD pair breaking down, making the exports coming out of Germany to be very cheap. That of course helps corporate profits, and I think that should continue to drive the DAX much higher. Beyond that, we have low interest rates in the European Union, and it looks likely that they will continue. Because of this, the DAX should continue to benefit over the next several weeks, if not months.

DAX Video 07.05.18