German equities remain resilient

Germany’s DAX remains one of the most interesting markets to watch this year and even as the rest of Europe struggles, equities in Germany have remained quite resilient.

Source: Bloomberg

With the ECB having deployed stimulus and the euro weakening significantly, it seems the DAX is in a very good position to benefit. Additionally, weaker commodities present the German economy with a net positive effect. Data out of Germany recently has also been showing signs of bottoming suggesting the economy is on the recovery path. Financial institutions will also have access to cheaper funds and this is good for the economy. Having said that, we have already started to see records being printed in a similar way to what we saw in the S&P when the Fed was conducting QE. Since the January lows when the DAX traded around 9375, the index has charged higher and traded to a high of 10,852. The pair has since pulled back a touch and is on the verge of testing support in the 10,500 region. This also happens to be the 23.6% retracement of the spike from January lows to its highs. Traders could consider buying into that region with stops placed below 10,288 which is the 38.2% retracement of that move. Targets would be initially to record highs in the 10,850 region.

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