The DAX Index managed to produce an early gap lower this morning without wrecking the high water marks it accomplished late last week. Trading was strong starting the day while breaking lower for a moment, but quickly reversed higher. This is a clear warning to speculators who plan on being active in the German index near term. Volumes were weak late last week because of the absence of US investors, but as they return to their offices after the long holiday weekend, they will impact equity indices worldwide.
Risk appetite remains rather optimistic, and this is highlighted by the DAX Index and other major indices which are approaching high ground. The early dose of trading action this morning shows that European investors are anticipating the return of their American counterparts, but the spike upwards after the early gap lower also indicates where current sentiment has the most traction.
However, traders will need to be careful short term. The return of US investors is sure to spark some momentary volatility to equity indices as trading positions filter into global indices and cause nervous reactions via quick-hitting reversals, which will likely happen. The US indices remain near important high water marks, but early indications from US futures markets are signaling a negative opening when the American trading day starts.
Traders should also take into account that today is the last day of the month and some financial institutions may try to cash in profits short term to show a positive gain for November. However, this doesn’t mean the DAX Index is about to see a violent reversal lower. Risk appetite continues to demonstrate optimistic signals and the German index is challenging important resistance. The 13400.000 will be important to watch; if this resistance level is broken higher and sustains higher values, it will be a solid piece of evidence that the DAX Index is expected to muster more upwards momentum.
Short-term speculators may want to remain cautious and look to enter the DAX Index with buying positions on slight pullbacks which test technical support ratios. Traders of the German index need to also monitor the American equity indices early today and see what happens when full volume hits. Trading is likely to be rather fast and volatile for the next few hours as positions are accumulated and action is anticipated.
DAX Index Short-Term Outlook:
- Current Resistance: 13400.000
- Current Support: 13320.000
- High Target: 13450.000
- Low Target: 13250.000
