After many weeks of sluggish movement in European indices; DAX
, the leading index of European indices YTD, is coming back to its original trend. It seems like consecutive selloffs many weeks ago are halting and reversing up. This seems like a healthy correction as the selloff was only due to sector rotation and Europe's fundamentals have not changed; another factor of the selloff was also due to EONIA index which is an inter bank rate. There was a spike up of the EONIA index and many investors worried that this could be the beginning of tightening money supply as EONIA is an actual transaction between banks unlike EURIBOR where it uses credit and EONIA has some correlation with EURIBOR so if EONIA index just keep spiking this could lead to higher 3M
EURIBOR. EONIA is sliding back down below EURIBOR 3M
again and that is a good sign for European indices not just the DAX
. Basically, you can go long DAX
, CAC, and FTSE
MIB. Technically speaking, Fisher Transform
is coming back with a pretty strong momentum and I believe it's going back to its previous high.
So, I recommend going long the index around this level.