Welcome to the GER 30 Index Outlook. The DAX 30 breaks 13,000 and reignites the summer rally. Mario Draghi has done it again with the announcement of continued low key interest rates and the ECB President sparked euphoria on Thursday. The German stock index has smashed through the top of the sideways range of recent weeks and the DAX 30 closed well above the major handle.
GER 30 Index Outlook – The Euro Crashes
We wrote the details about the ECB rate decision here already. A lower Euro can spur the sale of goods outside the Eurozone because it makes them cheaper in other currencies. Therefore the future expectations are that European countries like the Dax can do more business. This was a dynamic impulse wave and the strongest daily gain since April 5. It is highly likely that the momentum is almost exhausted in the short term. We are very close to the previous month’s high at around 13,200 and the current price action is incredibly extended. Clearly if the willingness to buy persists and the Dax rallies another three percent, then 13,500 is achievable. But without getting too far ahead of ourselves, this impulse wave will need a reaction leg. A pullback.
GER 30 Index Outlook – Don’t Forget Witching
If the markets rise in the run-up to maturity, the covered calls must be hedged by long futures.
It’s today. On a large expiration day, numerous futures contracts are due. Three types of derivatives expire: options on individual stocks, options on indices and futures on indices. The big expiration date on the derivatives exchanges could at times cause erratic movements.
Finance professionals know the importance of this day. The high financial resources at their disposal enable them to drive the markets for some time in the direction they consider beneficial. Which is the favourable direction, depends on the objective of the major players in the derivatives market. Perhaps yesterday provided the opportunity to ‘mask’ that particular activity for the larger trades. Let’s not forget that institutional investors are usually long in their base portfolio equities. In order to improve the return in trendless phases, they write call options and thus act as a writer. These so-called covered call options expire on the third Friday of the last month of the quarter as described above.
15-06-2018 GER 30 Index Outlook Analysis
Yesterday, I posted the following message in the premium group (grammar/spelling correct and reorganised for easy reading):
12:56pm – 12:59pm: Personally, I am looking for longs, I will be ignoring sell signals until we take out 12750. The bullish trend can resume on a break of 950. The ECB says that rates won’t go up over summer, QE continues until September before going down to €15bil until December. So it all depends on how the market perceives this and whether they believe that now there are clear skies until September, meaning conditions are good for longs, or maybe they will keep an eye on the fact that the markets preparing for the taper tantrum.
GER 30 Index Outlook – IB Breakout Strategy
I am currently writing a piece of code to backtest this strategy. It’s a very simple, common strategy based on the two hour initial balance (opening range) breakout. The idea is that when price breaks the range high or the range low, it can often provide a good reward:risk opportunity to trade in that direction. Normally 5 or 6 to 1. 
GER 30 Index Outlook – TPO Target
If we get a retracement, then I am looking out for the exposed POC here. We have a very fragmented profile from yesterday and the POC represents an almost 100% retracement, which is unlikely to happen today, but Monday or Tuesday? Let’s see.
GER 30 Index Outlook – Technical Levels
All three market’s daily 50EMA is above the daily 200EMA.
Notice that the Dax rallied nearly 2.5% yesterday, whereas the Dow was flat! That’s a good definition of disparity.
15-06-2018 Dax State Of Play
We have taken out 12950 and confirmed a new swing low. We are still in a series of higher highs and higher lows, therefore the facts are pretty clear about the nature of this market’s trend.
We have broken through the ML after the rally
We are testing the ML from the otherside
If the sloping MPL was a centreline (the MPL starts from the ‘B’ point of the fork, and is the thin downsloping black line), then we can measure how far price has moved above that, from the recent major low. This tells us that price could be coming to an exhaustion point.
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