The German stock index DAX is one of the key stock indexes in the world, and, by far, the leading index in Europe.
Our viewpoint is that the DAX stock market index will be bullish in 2017. This is, coincidentally, in line with Bloomberg’s DAX stock market forecast published a year ago.
Our bullish forecast is based on two key findings:
- The long term DAX chart which is displayed below.
- The primary market trend in 2017 which we expect to encourage risk taking (favoring stocks).
Let’s revise which bullish elements we see on the DAX stock market chart, and how we come to the bullish 2017 forecast.
As indicated on the chart, it is a rather complex chart but two findings are visible. First, the 2000 and 2007 peaks stand out. They are both aligned at the 8250 level. Second, since 2009, the DAX is in a rising trend channel, which is indicated with the two red lines.
Combining both findings gives an interesting conclusion: the important 8250 level was tested a couple of times within the rising trend channel, and each test was successful. In other words, there is trend of higher lows above the 8250 level.
A trend remains a trend until proven otherwise. So as long as the DAX remains in the current pattern, it will go higher.
It is not so hard to derive that our first price target is the 2016 peak around 12,500, which is a rise of around 20% from today’s level. So our first bullish 2017 forecast for the DAX stock market index is 12,500 points.
In case “risk on” becomes a dominant force in 2017, we would not be surprised to see the DAX testing its resistance line which would come in at 14,500 around the end of 2017. Are we saying that the DAX will reach that level next year? No, not at all. We are saying that it is a possibility only if there would be a strong risk taking sentiment in stock markets, so we don’t exclude it but don’t take it for granted neither.