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Germany's Stock Market & the French Election

Knowing where prices will go BEFORE the votes are tallied

by Nico Isaac
Updated: April 24, 2017

If you've been sailing the virtual "sea" of Germany's stock market over the last week, chances are, you've had your maritime compass pointed in one single direction: Due southwest, to the French Presidential Election.

Following the desired course, however, proved extremely challenging as a dense fog obscured the way. In the days leading up to April 23rd's round-one vote, the scene was shrouded in uncertainty. Wrote one April 21 news source:

"Dax is showing little movement as investors on sidelines ahead of French vote.

"There are small odds of a worse-case scenario in which the first round could usher in a race between the two candidates markets fear most -- the far-right Marine Le Pen and far-left Jean-Luc Melenchon...

"A market-benign outcome still seems most likely but there is a meaningful risk that something more worrisome happens." (CNBC)

In other words: German investors should drop anchor. Sit tight. And wait and see whether the widely feared apocalyptic "Frexit" scenario plays out.

Or ... not!

See, in the same uncertain days leading up the April 23 vote, on April 21 our Stocks Pro Service set politics aside and Elliott wave analysis front and center. There, editor Murat Yilmaz provided clear insight of the DAX's near-term trend, calling for a rally to new highs:

"The bottoming process ... seems to be continuing, as prices remain reluctant to exceed the 12115.5 levels for now. However, as long as trading continues above the 12026 line, new highs should be breaking above this short term halfway resistance ... We will set the previous high at 12268 as initial next target in that case." --- Murat Yilmaz

What happened next?

On April 24, the DAX surged skyward to a record high, pictured below.

Mainstream analysts called the move a "relief rally," triggered by the fact that centrist Emmanual Macron beat Melenchon in the polls on April 23. Meanwhile, our April 21 Stocks Pro Service factored in a rally long before "relief" at Macron's defeat existed.

So, the next round of the French Presidential election takes place on May 7. We can't say who will win. But we can say investors using its outcome to gauge the markets' near-term trend will again face a lot of uncertainty.

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