DAX Market Outlook 31/10/2014

DAX Market Outlook 31/10/2014

Well for those who were long the DAX this morning, congratulations. Whilst you can’t have expected the BoJ decision, you certainly profited from it and now the DAX is trading past the 9250 level. It seems there can only be one direction for it now.

BULL ARGUMENT

There is a lot more activity in US with their economy now seemingly expected to get back on trace. Confidence is coming back to their markets and this will spread through the global financial markets. Hedge funds have recently leapt onto the lower stock prices from the middle of the month and used the sharp sell off to increase their holdings which has boosted the market. US markets have almost completely recovered their losses during the last few weeks and you would imagine DAX will do the same. The BoJ has increased its use of QE which has devalued the currency, we all know the correlation between USDJPY and DAX. Finally deflation in the eurozone is a big risk with Germany being the largest economy contributing. If deflation hits and ECB decides to print more money, expect a sharp shoot north for the DAX. Unemployed in Germany fell.

Lots to support a bullish case

BEAR ARGUMENT

Germany’s government bonds rose for the first time in three days as consumer prices in Europe’s largest economy unexpectedly slowed in October, boosting demand for the euro area’s benchmark fixed-income sovereign debt. Deflation would have very negative consequences for the whole euro zone, so that’s bullish for bunds. The bund seems to have negative correlation with the DAX. We are overbought in the short/medium term after sharp boom north on back of BoJ and have smashed through all the key levels and pivots. A pullback will be expected in the short term, but only the short term.

Not so much strength to the Bear argument anymore.

No point posting the key levels today. The move has happened already.

DAX Market Outlook 31/10/2014

DAX Market Outlook 31/10/2014