The current chop is taking on the shape of a bull-flag and looks poised to break soon, but may need a day or two more of filling out first. The first level of contention on a push higher comes in quickly at the 1/3 swing high at 11637, and upon breakout the DAX will begin looking to test a series of swing highs created during the descent from the record high in 2015. Top-side levels in focus: Aug ’15 – 11670, Jul ’15 – 11802, and May ’15 – 11920.
Should the recent backing-and-filling turn into something more aggressive, we will look to the top of the late-December channel at 11481 and bottom of the channel around 11400 as key points of support. It would be important to hold onto the low end of that channel and the low of the day (1/2) which began the year. A drop below 11400 would be damaging for prospects of higher prices, and warrant a shift in bias towards lower prices.
But for now, the DAX is acting well, global risk appetite remains relatively healthy, so we will roll with the notion of seeing higher prices in the not-too-distant future.