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Positive momentum is fading – Europe remains strong!


The positive momentum in financial market seems fading a little bit since the start of this year. Some retracements or slight corrections should be seen as positive for strong movements in general to prevent markets from overheating too much. Yet, current moves are not significant enough to tell if the current direction is just a pause or a correction. Time will tell.

Important right now is the visible difference between stock markets in the US compared to the Eurozone. US markets were not able to create some fresh dynamics compared to Europe and Asia. Last year, momentum in the US was much higher, which likely has to do with the crisis in the Ukraine. The risk aversion forced market participants to move funds towards the US, which led to a stronger Dollar. Yet currently, despite the fighting in the Ukraine is going on, we can observe that markets are seemingly reevaluating financial markets in general. One of the reasons might be that the previously expected scenario of a growing war and further implications to the Eurozone has not happened. The energy crisis has not turned into an even bigger disaster as new sources of oil and gas have been found. In this regard we can also note that energy prices have stabilized and in particular gas prices were able to come down from previous higher levels, which are now at similar levels compared to December 2021. Despite the fact, that the general underlying crisis has not been solved we can currently observe that the interventions by governments have caused one thing: Europe is still functioning and the situations seems under control until now.

While China has opened the economy again, the support also for the European continent can be seen and supply chain issues have been mostly solved. The latter has also been seen as less critical according to global surveys.

Since European stock markets were not only able to close positively, we also expect a scenario of further rising momentum for now. This is only true, however, for the Eurozone as markets in the US are showing a rather mixed picture.

Trade idea:

We like to focus mainly on the German DAX40 index for now. The market has been positive in recent months and the clear upside trend had been established again.

DAX on the monthly chart: the month of January started with extremely positive sentiment for now

Since the recent trend has turned bullish again, we expect the uptrend to continue and potentially even cause the DAX to reach its previous all- time- high at the 16.250 level.

Weekly chart: a clear breakout above the Highs from December can be seen

We bought the DAX40 at 14.800 as market order and expect the index to run higher.

⛔️Stop loss: 13.870
🎯profit 1: 16.000
🎯profit 2: 17100

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