DAX Continues Rally – Set to Make a 3-Day Streak

DAX is up 0.8% so far this session and continues a 2-day rally despite today’s poor economic data.

Industrial Production MoM released earlier today at -2.5% compared to last month’s 0.1%. The market seems to have taken it in its stride, and that’s also taking into account forecasts were for a small rise in activity by 0.2%.

One reason why the market is not too worried by the drop in monthly industrial activity is that most of the DAX are large exporters of their goods, and international trade has a greater weight than local industrial production.

Auto tire -maker Continental is leading the way for the index, up nearly 7% on the day as the stock continues to rally from a recent low. Other top performers include MTU Aero Engines up 2.08% and Hannover Ruck 1.91%.

The attention now turns to this afternoon’s Non-farm Payrolls from the U.S. The markets are expecting a decline from last month’s 272k to 190k. The decline would still show an expanding economy, be it at a slower rate.

The market may accept the news well, as investors would consider that the Fed may see less inflationary pressure from a lower employment number.

Technical View

The day chart below for the DAX shows a market still in a bull trend with the market back above the cloud. Today’s candle is finding resistance at the level of 18,601 (black line), which is a high set in April.

We may see more bullish action if we get a close above the black line, after which the next resistance would be at the all-time high of 18,911 (red line). To the downside, the market has immediate support from the cloud.

Then further below the cloud at 17,939 (green line), which was the low of the correction from the ATH. To consider the bull trend as back in action we would need to see a close above the ATH. For the meantime the market is now looking like it is likely to trend sideways.

The upper and lower boundaries of the ATH and the green line from the last dip at 17,939 will set the liekly range.