The German DAX index received a major boost last week from the country's overwhelmingly positive manufacturing and services numbers for the previous month. Germany continues to grapple with the coronavirus pandemic because of persisting problems with its vaccination plans; however, the biggest economy in the Eurozone benefits from a global pickup in economic activity.
European stocks have shown some resilience in the midst of a massive selloff in the U.S., but it remains to be seen whether the DAX would be able to continue probing further into uncharted territory while investors' sentiment in the U.S. continues to diminish. The rout was prompted by reinvigorated fears of rising yields, even though the Federal Reserve pledged to continue with its accommodative monetary policy stance.
There could be a spillover in European markets, though there are no indications of any imminent danger just yet, given the relatively uneventful economic calendar for this week. An unnerved market could, therefore, drive the price of the index to the closest support level, even though the underlying market sentiment looks ostensibly bullish. That is why today's analysis examines the likelihood for the emergence of a new bearish correction before the broader uptrend gets ready to resume climbing higher.
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