The DAX index rushed to the upside as the US cash markets were about to open for trading. At the time of writing the index was 0.35% away from its 2019 high. The rationale behind the move to the upside is the idea that the UK has managed to avoid a hard Brexit with PM Johnson sending a Brexit negotiation extension request to Brussels.
Amongst traders there were also talks in the markets about Chinese leading indicators bottoming out and that it is just a matter of time before European and US indicators do the same. This idea is not new as at one-point cuts in interest rates by the Fed and also, the QE program by the ECB should boost the real economy.
Later this week we will get the latest German IFO figures but also the latest Markit PMI figures for the US and Euro area, and they will be able to let us know if the US and Euro area economies indeed has started bottomed out, something that I doubt. The indicators can’t also capture the likelihood of the US – China trade talks to fail.
Special free webinar for traders: Price Action & Market Structures for 2019. Register now.
Technically, the outlook is clear for the DAX index. The very short-term trend is upwards above the October 18 low of 12599.5, and as long as the price trades above this level there is a risk that the index rises above last week’s high.
However, on the daily charts (not shown here), but discussed last week, I said that the index formed a bearish pin bar pattern on October 17, and that the index was at risk of trading lower on profit taking. This scenario remains in play, however, if the index trades above last week’s high of 12832 the bias will shift to the bulls, and the index might open the door for a gain towards the June 2018 high at 13186 in the weeks ahead.