A Deep Dive into the German DAX

• Posted by Greg Harmon
• on January 4th, 2018

Cheers to the German market! After a mid year swoon it was able to recover and post a solid 11.5% gain for 2017. What better reason for Angel Merkel to celebrate with a small mug of beer? No need to tell her that much of the rest of the world, including the US markets, were up substantially more. A gain is a gain right? But what is in store for the German market for 2018 and beyond? Brexit remains an uncertainty and now tax cuts in the US make the competitive landscape tougher.

With all this uncertainty the only truth is in the price action. The chart of the German DAX Composite below tells a strong story. The first thing to note is the rounding higher in the chart. The curved red line shows a series of higher lows that indicate acceleration in the trend higher.

The first bullish point was in 2013 as it broke an ascending triangle higher. That gave a target to about 13,500. As it continued to move higher into 2015 it completed a bearish Deep Crab harmonic (the two triangles) and pulled back a nearly perfect 38.2% before reversing again. Where was the 38.2% retracement? Right at that ascending arc.

The continuation higher met resistance at the prior top and digested the move in a bull flag. With a second thrust underway the Measured Move higher gives a target to 15,500. Momentum remains strong with the RSI in the mid 60’s and the MACD positive. As long as it holds over 12,000 the German DAX looks like it will give Merkel cause to raise a glass again next year.

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