Yet another attempt was made by the DAX index to make a convincing break through the 13000 region and yet again, it failed as it was faced with a lot of selling in that region and it ended the day below 13000. The close below the 13000 region exposes it to the vagaries of the traders and this raises the prospect that we could see a correction lower. We have been saying many times in our forecast that the index needs to make a decisive move.
DAX Continues Its Struggle
Such a decisive move higher would send a signal of strength to the traders and investors and then they would be emboldened to buy more which would then push the index even higher. But so far, the message that has come across from the DAX bulls has been one of weakness and trepidation and this is not a sign that potential buyers would like to see. They would like to see a market that is decisive and something that they know that they can invest in, with confidence of returns.
The fact that the index has been struggling at the same time period when the other major stocks market in Asia and US have been making new highs places added pressure on the DAX to make use of this opportunity to push higher. Else, it is likely to be exposed to the risk of a large correction when the rest of the markets enter into a bear phase. It is in this context that the ECB meeting and the statement later in the week is likely to assume significance as the European stock markets have been on the backfoot ever since the ECB raised the possibility of QE tapering. The market would expect a firm statement on when to expect tapering to happen and this will then likely provide the short term direction for the DAX.
Looking ahead to the rest of the day, we have the services and manufacturing PMI for Germany and Eurozone today and the bulls would wish that these come in stronger so that it would aid them in their push higher. Any decisive move is likely to wait till the ECB statement and press conference is done and dusted.
This article was originally posted on FX Empire