Fundamentally, despite the deflationary atmosphere, there are good reasons to fit a strong rally:
1) German DAX has a big portion of its sales in USD and is Industrial skewed and EURUSD Fell 20%.
2) Valuation are currently at 10 for the DAX versus 17 in the US.
3) After QE announcement, rates are close to zero on a 10y basis (much lower than the US equivalent).
4) DAX has been flat for a year in 2014.
The first move up was swift and fed by all the reasons above and also the fact that there were many shorts in place.
Now, HOW TO FIT A STRONG RALLY:
A strong rally has to be slow to avoid hiting into speed resistance too soon and trigger large corrections.
if the dax is to remain strtong for a long while after marking a top in the next week, it will have to relax and start to move at a slower pace probably in the "green band".
1) German DAX has a big portion of its sales in USD and is Industrial skewed and EURUSD Fell 20%.
2) Valuation are currently at 10 for the DAX versus 17 in the US.
3) After QE announcement, rates are close to zero on a 10y basis (much lower than the US equivalent).
4) DAX has been flat for a year in 2014.
The first move up was swift and fed by all the reasons above and also the fact that there were many shorts in place.
Now, HOW TO FIT A STRONG RALLY:
A strong rally has to be slow to avoid hiting into speed resistance too soon and trigger large corrections.
if the dax is to remain strtong for a long while after marking a top in the next week, it will have to relax and start to move at a slower pace probably in the "green band".