- The German DAX has been slightly positive during early hours on Wednesday as most of the trading world seems to be focusing on what the Federal Reserve has to say later in the day.
- While not directly affecting the DAX, it does suggest where monetary policy may head for many of the world's central banks.
- This is a situation where a lot of inference will be made during the press conference as to what central bankers are thinking on the whole.
Loose Monetary Policy Coming?
With this, they are looking for loose policy and that will help liquefy markets, including the DAX. Keep in mind that the German economy is very slow at the moment and that has people hoping and waiting on the European Central Bank coming in to loosen monetary policy. That being said, it does tend to help stocks and considering that the DAX is heavily export-laden, it does make a lot of sense that it continues to go higher. When you look around the continent, you can see several other indices are doing fairly well, including the CAC in France. So I think it all ties together quite nicely for more of a risk on type of trade.
I do believe that we have a lot of support at the 18,000 euros level and then again at the 17,600 euros level. Pullbacks to these areas will be thought of as potential buying opportunities and I will treat them as such. Longer term, I believe that the DAX goes looking to 20,000 euro although it's probably going to take some time to get there, and I would also anticipate that we do sooner or later get some type of pullback in order to attract more buyers. This market has been very bullish for some time, and I don’t see that changing anytime soon as the markets are creatures of habit, and it would take a lot of momentum to switch this thing to negative anytime soon. Barring some kind of shock, Germany will continue to see inflows.
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