DAX Time to respect the 17-year Channel and correct.

Exactly 3 months ago (December 06 2023, see chart below), we set a 17800 Target on DAX (DE40) and the index hit that level yesterday:


At the time DAX was the first major stock index to hit new All Time Highs (ATH) and as we mentioned it "sent a message to indices globally". And followed they did, as all markets followed this lead and rose aggressively.

This time however, DAX is sending a bearish signal as by hitting 17800 it reached the top (Higher Highs trend-line) of the 17-year Channel Up that started on the July 2007 High, right at the peak of the U.S. Housing Crisis.

At the same time it almost hit the 1.382 Fibonacci extension, which is a key level as every time the index (nearly) hit it (May 2014, January 2018, February 2020), it corrected by at least -15%. As a result we think a test of January's Low at 16350 would be a modest target, even though it might seem unrealistic under the current market sentiment. A -15% decline would even test the 1M MA50 (blue trend-line) for the first time since November 2022 and the post Inflation Crisis recovery.

Note that we currently only starting the 3rd Mega Cycle. Both previous 2 peaked their Higher Highs on the 2.0 Fibonacci extension (measuring from Sine Wave Top to Sine Wave Top). So on a multi-year basis, as investors we look to take advantage of these corrections and buy for an ultimate 2028 Target at 20500.


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