DAX ‘Brilliant’ Run Sends Red Flag as Index Briefly Tops Record

The rally in German shares took the benchmark DAX Index above its July record today. The gains might have come just a little too fast.

The relative strength index, a measure of market momentum, has been above 70 for more than a week, the longest stretch in a year. That indicates the DAX advance may have been too quick to maintain. The index has rallied 16 percent from a one-year low in October and jumped as much as 0.8 percent today to 10,038.21. That was short-lived: The DAX closed down 0.3 percent.

“We’ve had such a brilliant run,” Achim Matzke, the head of global index and technical research at Commerzbank AG in Frankfurt, said in a phone interview. “It is unusual. It would be a big surprise if the market breaks to the upside because you are short-term overbought.”

After a 13 percent slump in less than a month, investors have regained optimism over the euro area’s biggest economy. The DAX climbed for 12 consecutive days through the end of last week on speculation an increase in central-bank stimulus will further weaken the bloc’s currency, helping German exporters.

The relative strength index compares the size of recent gains to recent drops. Last time it was above that level for that many days, the DAX fell 4.2 percent in less than two weeks. The RSI indicated an oversold level for eight straight days in October, as German shares were about to start their rally.

Since its low on Oct. 15, the DAX posted the second-biggest increase among 18 western-European markets. Deutsche Telekom AG and Deutsche Lufthansa AG advanced the most, surging more than 27 percent. On Nov. 28, the German index closed 703.04 points higher than its moving average for the previous 50 days, the biggest gap since 2011, data compiled by Bloomberg show.

The DAX peaked at 10,029.43 in July.

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