Key Talking Points:
- Equities push higher as bond yields stabilize
- DAX 30 bulls aim towards the 14,000 mark
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Equities have managed to start the new month on the front foot as bond yields are taking a breather from their rapid surge over the last few weeks. Positive momentum has also been aided by the progress in approving the $1.9trn stimulus package in the US and the authorization of new Covid-19 vaccines.
The DAX 30 is approaching the 14,000 mark as last week’s selling pressure proved to be insufficient to consolidate a head and shoulders pattern and achieve further pullbacks, leaving the German index in a strong position to attempt a new push higher.
For now, the relative calmness in bond markets is thought to be calming investor’s nerves about higher inflation on the back of vaccine rollouts and large stimulus packages, whilst falling infection rates are helping bullish sentiment consolidate. That said, I do believe the current moves in the bond markets are a pause for air rather than a move towards stability in the short-run, which means volatility could spike up again.
German Bund Yield Chart (Aug 2020 – Mar 2021)
DAX 30 Levels
Looking at the daily chart, the DAX 30 looks to be in a strong position to consolidate bullish momentum as the overbought conditions of the last few weeks have now been fully reversed. The stochastic oscillator is now sitting just above the midpoint whilst the MACD is reducing the negative convergence between its lines, pointing towards the possibility of new buying pressure appearing.
That said, I still struggle to see enough bullish momentum to attempt a break above topside resistance at 14,140. A break above last week’s high at 14,075 would allow us to become more confident in the push higher, whilst another rejection at this level may see new sellers attempt to bring the index down again. To the downside, the 13,600 continues to be a significant level of support, so any attempt to push below is likely to gain further traction if successful.
DAX 30 Daily chart
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— Written by Daniela Sabin Hathorn, Market Analyst
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