The Dax index is nearing last week’s high of 12500, and if investors manage to lift the index above the previous week’s high, the DAX 30 might start to drift towards the July 25 high of 12606.7, as it is the next significant high.
However, I do not anticipate the move upwards to be a smooth ride as the DAX index has risen 8% from the August 26 low of 11563 without any substantial declines. This means that traders that bought in late August are holding significant floating profits, and they could try to unload these positions as the DAX index reaches its old highs.
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As the August 26 low is the latest major low, the potential profit vs. the possible loss, is not favorable for new traders, and this is the second reason why we should not anticipate the DAX index to add to its gains easily.
Investors betting on lower prices, and an increase in risk-aversion, will probably need to wait until the Dax index declines below the September 17 low at 12302, as a break to this level will turn the short-term trend bearish, and will probably send investors with profits heading for the exit.Download our latest quarterly market outlook for our longer-term trade ideas.
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