What’s inside:

• The DAX is undergoing quiet digestion of Monday gains
• Sticking with the bullish trend until price behavior suggests otherwise
• Support and resistance levels highlighted

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It’s been a few uneventful days of trading in Germany, with the DAX constructively digesting Monday’s rally so far. As we noted on Wednesday, the DAX looks poised to continue moving higher as long as the surge to start the week holds and the market doesn’t trade below the base (~11400/80) created during the final days of December.

Top-side levels in focus come in at a series of peaks created during the descent from the 2015 record high. The first level is close at hand, just above at 11670, with extended levels at 11802 and 11920.

We’ll continue to reside in the bull-camp as long as price action remains as it has – higher, then sideways, higher, and so on. Taking it one step at a time we will look to resistance levels and evaluate, based on price behavior, and determine if the market looks likely to continue its upward trend or has exhausted itself. Should the DAX begin an aggressive decline, though, taking out the 11400 level, then we would we need to consider the possibility of a larger down-move unfolding.

Global risk appetite remains healthy when looking at other major markets in the world – Nikkei, FTSE 100, S&P 500 – all of these continue to hold solid bids and have yet to show signs of reversing. We will continue to monitor general risk sentiment for signs of fracturing along with signposts in the DAX that the prevailing trend has exhausted itself. With that said, these markets are already on the extended side (especially the Nikkei) when looking at the rise dating back to early November. But extended can become more extended.

At the end of the day, staying the course from the long-side or neutral at the least looks like the best route for now, and we have no interest in fighting the prevailing trend until it provides signaling that it’s turning.

DAX: Daily