DAX Fundamental Analysis – week of January 30, 2017

The DAX index finally managed to break through the range after 2-3 weeks of consolidation and ranging. Ever since the beginning of the year, the market had been traumatized by the impending assumption of the Presidency by Trump and the market was worried about what to expect from him. The markets are happy with stability even if it leads to something bad but the markets hate uncertainty and instability and that is the reason why the major stock markets around the world were in a wait and watch mode. But over the last week, Trump’s team has taken over and have generally followed up on their campaign promises. Though some of the moves were not generally welcomed, it atleast served to clear up the uncertainty and this led to the US stock index closing on all time highs and this helped the DAX as well.

The DAX index broke the range during the middle of the week as it rocketed through 11700 and 11800 and it closed above 11800 at the end of the week. We had been mentioning that the bull run in the index continues to exist and this is evidenced by the fact that the corrections have been shallow and have been met quickly with a lot of buying. Add to it is the fact that the German economy continues to perform strongly with the only event of risk being the German elections which are to be held in September and where a serious challenge is expected to the long reign of Merkel as the Chancellor. But with that event still a long way off, we should see this bull run continue for sometime.

Looking ahead to the coming week, except for a speech from Draghi, which is usually a non-event, there is not much economic news from the Eurozone but the US will be releasing loads of data including the FOMC statement and NFP and this is likely to have a large impact on the markets. And with Trump and his team also going ahead with making many changes to policies, it promises to be an interesting and volatile week ahead.