With the U.S. NFP topping its estimates by printing 271k vs. a Bloomberg News survey forecasting 185K, we are more confident about the DAX 30 index reaching our target of 11,150.
We assume that traders will keep on supporting the DAX on dips and suspect that they will see the 10,870 – 10,950 range as an ideal region to add to long positions. However, the DAX index could drop lower than 10,870 without altering the trend and our new defining level is the low seen last Thursday of 10,770. In the case that the DAX 30 breaks Thursday’s low of 10,770 the trend would turn bearish and the DAX would be expected to trade lower.
The Euro-Zone Sentix Investor Confidence is on tap today and expected to print 13.1 from 11.7 according to an economist poll. This may add to market volatility but not enough to alter the bullish trend of the DAX 30.
In the longer run and with better data coming out of the U.S. such as wage growth reaching a 6 year high byincreasing 2.5% YoY, the likelihood of stock markets globally remaining upbeat rises. If it is the case that we reach and break the August 13 high of 11,150 (our target), there will not be any major technical resistance level until we reach the August 8 high of 11,615.
A push higher at this time of the year is also consistent with seasonality as traders get in line to take advantage of the Christmas rally effect. The biggest risk we see ahead of us is a Fed rate hike. The first rate hike tends to cause a pullback in equity markets and the market also tends to be shaky on fear of what that first rate hike may bring.
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