The German DAX continues to see buyers on dips, as we are looking at a market that is trying to see upward momentum take over again.
DAX
The German index rallied during Thursday’s session as a bit of a relief rally occurred around the world after the Federal Reserve interest-rate hike decision. Although signaling rates higher in the United States was not as aggressively stated as perhaps people had feared, it offered some support.
The second important tailwind for Germany is that the crude oil market is starting to drift a little bit to the downside, and that helps Germany’s massive industrial sector. That being said, energy costs in the European Union remain fairly elevated. EU gas storage is only around 69% full versus the typical 5-year seasonal average of 85%, and European gas prices are right around €81 per megawatt-hour, roughly 150% higher year over year.
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Germany is particularly exposed because of its energy-intensive industrial base. The energy shock also keeps the ECB in place, so that is negative as well, but it looks like, at least for the short term, Germans are willing to look past it.
There are some big index movers during the day.
Siemens, Allianz, and Lufthansa are all positive, with SAP slightly negative. Ultimately, the 26,000 level is an area that a lot of people are going to see as a ceiling, but if we can break above there, then it is likely that the market could go looking to the upside.
Any short-term pullback at this point in time could challenge significant support near the 25,300 level. Overall, this has been in a strong move to the upside for quite some time, and that means that the path of least resistance probably is higher.
It is also worth noting that the stochastic oscillator crossed in the oversold condition, so all things being equal, this is a market that remains well supported from a longer-term standpoint, as German spending this year could very well end up being a boost also.
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