DAX Steady as Focus Turns to US Elections

Last Friday’s close bounced off the week’s lows and this week’s trading has kept the index in a tight range.

The major global stock indices are positive in the London session as the US prepare for its presidential election. The DAX is up 0.32% on the day, while the NAS100 is up 0.26% and the NIKKEI225 is up 0.52%.

Investors are considering the possible effects of a Trump victory, with major bookmakers giving the candidate a lead between 54% and 66%. Most of MSM is raising the concern that tariffs on China would hinder economic growth.

However, that’s not what we saw in Trump’s previous term in the White House. The markets in the U.S. are still riding the wave of lower interest rate policy and the AI tech boom. On the other hand, the German economy has been lackluster and lagging behind its European peers.

Most of the return growth from the DAX has come from its positive trade balance, which relies heavily on its partners, the U.S. and China. Today China’s Caixin PMI was higher than expected at 51.9, compared to the forecast 50.6.

We can expect a large amount of volatility tonight and tomorrow morning as the vote count reports are released.

Technical View

The day chart above for the DAX shows a bullish market that is undergoing a retracement. The market broke above the Ichimoku cloud in August to regain the bullish momentum. The current bearish leg comes after the completion of the 5-wave Elliot cycle.

What remains to be seen is whether the Elliot wave theory will lead to another cycle higher. There is a possibility that the Elliot wave series is completed on wave 7, that would make this correction wave 6, and wave 7 should push the market past the all-time high of 19,681.

The market for now has found support on the previous high of 19,050 (red line). Which is also close to the support of the cloud. My only concern comes from the RSI, which has failed to rise above the level of 70 on each of the bullish legs in the last cycle.

This failure indicates a low level of momentum, and I doubt any attempt to rally higher will lead the index past its all-time high.