- DAX consolidation in record territory should lead to test of long-term top-side trend-lines
- CAC undergoing period of digestion, should resolve towards the May highs or better
- Bullish in the immediate future, but want to be careful on extension into key levels/lines
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Last week, when discussing the DAX, we were cautiously bullish as the market continues to trade higher but is currently over-extended, and more importantly, facing a test of long-term top-side trend-lines on another push higher from here. The week-long consolidation in record territory suggests we will soon see a resolution higher. Support is close at hand by way of the late-August to current trend-line.
However, from just over 13k to 13.1k lies a pair of long-term trend-lines (2000-2015, 2015-2017). They are indeed long-term in nature, especially the former, but still could be quite relevant, even if just for a short period of time. We’ll be paying close attention to how price action plays out at those lines for clues on what to expect next. A breakout from the recent range may prove to only be temporary before a correction sets in.
Along with the DAX, the CAC has been undergoing a period of consolidation and is set to resolve to the upside. While the German index has potential cappers not far ahead, the French market has a little room to run before finding resistance by way of the May high at 5442. It’s a significant high not only because a breakout above would mean new multi-year highs, but an important event marked the end of the rally up to that point – the French elections. As long as the current consolidation doesn’t turn into a sharp slide lower, then the targeted objective is the May high at the least.
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—Written by Paul Robinson, Market Analyst
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