Bullish DAX Momentum Gathers Pace, S&P 500 Remains Bid Following FOMC

Equity prices remain bid going into the second week of May, with the near-term outlook for the DAX tilted to the topside, while the S&P 500 looks poised for a breakout amid the narrowing threat for a global trade war.

Even though the two days of deliberations in Beijing failed to produce any meaningful signs of progress, ongoing negotiations between China and the U.S. may continue to shore up market sentiment especially as President Donald Trump delays the steel and aluminum tariffs to June 1.

DAX RALLY RISKS BEING LABELED OVERBOUGHT AS BULLISH MOMENTUM GATHERS PACE

With the European Central Bank (ECB) interest rate decision out of the way, the DAX appears to be on track the extend the upward trend from the March-low (11,705) as the bullish momentum appears to be gathering pace.

DAX (GERMANY 30) DAILY CHART

Recent price action keeps the topside targets on the radar as the DAX breaks out of a near-term range, and a break/close above 12,872 (61.8% retracement) raises the risk for a move back towards 13,193 (78.6% retracement) as an upward trend takes shape. Future developments in the Relative Strength Index (RSI) may also reinforce a bullish outlook, with a break above 70 raising the risk for a larger advance in German shares as the indicator pushes into overbought territory for the first time since last-2017.

S&P 500 SNAPS BACK AHEAD OF APRIL-LOW AS FOMC TAMES BETS FOR FOUR RATE-HIKES IN 2018

The S&P 500 trades on a firmer footing following the Federal Open Market Committee (FOMC) interest rate decision, and U.S. shares may continue to recoup the losses from earlier this year as the central bank tames expectations for four rate-hikes in 2018.

S&P500 (US 500) DAILY CHART

A bullish sequence takes shape following the failed attempt to test the April-low (2,553), and the index may stage a near-term breakout as it approaches the apex of the triangle/wedge formation from earlier this year. As a result, a move above the April-high (2,718) opens up 2,750 (38.2% expansion), with the next region of interest coming in around 2,817 (50% expansion).