Germany 30 has broken out to its highest level of 2016, clearing its April high. With major indices in the US and UK trading near 2016 and/or all-time highs, there appears to be significant scope for catchup rallies in the Germany 30 and other continental indices.
Germany 30 plunged to start 2016 diving from near 10,880 to a low near 8,680 before stabilizing in the 9,200 to 10,500 range where it has been consolidating for the last four months.
Rising RSI in recent weeks indicated upward momentum has been building while the recent breakouts by major US indices to new all-time highs has provided leadership.
Germany 30 has cleared 10.500 which may now become new support with next potential resistance near 10,880 where it topped out in December then the 11,000 round number and the November peak near 11,400.
Ongoing political and economic risks in the EU and Eurozone have weighed on continental indices throughout the year. The rising Euro relative to Sterling through and after the Brexit decision has weighed on continental indices which have underperformed their US and UK counterparts.
As the year has progressed and particularly into the summer, it has become increasingly clear that the economic turmoil which had been feared at the start of 2016 has failed to materialize and looks unlikely to emerge any time soon. Not only has the US economy held up well but the potential impact of the Brexit decision also appears to have been overblown.
With central banks in the UK, Australia and elsewhere still supportive and a strong environment for corporate earnings emerging, stocks in the US and UK have been on a tear lately opening up the potential for catch up moves in markets which have been lagging like Germany.
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