DAX Market Outlook 30/10/2014

Now that the markets have absorbed the FOMC decision from yesterday it appears that the market is reacting to the very hawkish monetary policy stance from the Fed. So the strong bullish days may be slowing down and the bears may come back and join the fight.

I read earlier that technically the FOMC has finally closed the door on QE with the $15b taper; however, never say never as bookies are already making odds that the central bank could crank up a new bond-buying program to take its place if the US economy happens to turn south once again.

Investors will again be shifting their focus back to the ECB – Euro policy makers know that they have to pick up the slack as they continue to face a serious deflation threat. An article was released earlier asking “Should we hang on a moment before we write the obituary of the German economy?” Continuing on to say that indeed August had some terrible data and experts have drastically cut their forecasts for Europe’s engine room, but subsequent data haven’t been so bad. For example, GfK’s forward-looking confidence indicator rose in November, when it was supposed to fall. Also just now, the labor agency says that seasonally adjusted jobless fell by 22,000. Experts polled by The Wall Street Journal had forecast a rise of 2,000. It is of course true that just as we shouldn’t get too worked up by one month’s bad data, we also shouldn’t overstate one month’s good data, and indeed unemployment is often a lagging indicator. But still the recent data show something is still ticking in the German growth machine.

Today the move has already happened and my strategy is to sell on pullbacks. It seems that the 50 fib zone is when price has turned. We have already taken out a number of levels today so downside may now be limited, because we have passed the daily S2.

DAX Market Outlook 30/10/2014