A Long Term View On ….the German DAX
- Posted by Greg Harmon
- on December 11th, 2012
Germany has been the rock of the European economy and many think their backing is the only thing holding the Euro together. It stands to reason then that the troubles in Greece, Spain….all of the Continent, would be a drag on their markets. What do the charts say about that happening? Not so much. The daily chart below shows a bullish pattern, breaking out of the expanding wedge higher. The target from the wedge break takes it to 7950. But there is another pattern working on
this timeframe. The move from the June low to the September high is nearly identical to the previous move from December 2011 to March. Looking at a similar Measured Move higher from the November low creates a target of 8510. But the picture gets better on the longer weekly timeframe. The 4 year chart shows a nearly perfect bearish Harmonic AB=CD pattern forming. yes I said bearish but the the Potential Reversal Zone (PRZ) has a range higher for point D between 8971 and 9231 and should be about October 2013. With the top at 7600 from May 2011 only 70 points
away as the last obstacle, and a bullish and rising Relative Strength Index (RSI) and Moving Average Convergence Divergence indicator (MACD) that has turned positive and is growing supporting it, there seems little danger of a failure to move to new highs. But this is just getting warmed up. The monthly chart below prominently shows an ascending triangle over the last 13 years with the top rail at 8150. Even though that is over 600 points higher the shorter views show it could easily get there. A move over the top of the triangle carries a target of 13,900. Crazy town?
Maybe, but this market looks bullish not matter where you are looking from. So in summary the short run shows a strong chart breaking out with a target of 7950 and over that 8510. Those give weight to the intermediate term view that shows a PRZ between 8971 and 9231. Both of these take the monthly chart over the top rail and then trigger a target of 13,900. Seems like Germany is the place to be.
This is the third in a series of A Long Term View On …. articles that will appear of the next few weeks.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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