Dax index is on track for a positive quarter as investors buy the dip

on Mar 27, 2023
  • Investors bought the dip as European stocks rebounded
  • The Dax index's bullish bias remains as 2023 highs are in sight
  • US stocks may help as the banking crisis eases

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The last trading week of the quarter has started today, and the mood in European stock markets is optimistic. Investors bought the recent dip in main indices as the stock market decline has been met with buying orders.

News from the United States, where several regional banks failed in March, sparked fears that a global contagion will follow. Sure enough, Credit Suisse failed too, and UBS bought it at a huge discount.

But that’s what happens when banks fail – some other banks swallow them, mergers take place, and everybody moves on. Therefore, stock market investors kept calm and bought European stocks, as reflected by the German Dax index, rallying from the recent low.

In fact, the index is on track to deliver a smashing quarter. What comes next?

2023 highs are back in focus

The Dax index formed a falling wedge pattern in 2022 that ended last October. From the moment it broke above the upper trendline, the market no longer looked back.

It closed the year after rallying 2,500 points from the lows and ended up forming a bullish triangle. Then, immediately after 2023 started, the triangle broke higher, and the market moved another 1,500 points.

The banking crisis led to a decline, but investors kept their calm, and new buyers arrived. As such, the series of higher highs and higher lows remains intact, and so the bias remains bullish for the Dax index.

With no important economic data scheduled this week, the chances are that the index will threaten to break the 2023 highs. Moreover, if the US stock market stabilizes and rallies as the end of the quarter nears, then the Dax will follow.

All in all, European stock markets are in good shape, with the Dax index leading. More of the same should be expected as long as the higher highs and higher lows series continue.


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