Germany’s stock market achieved a historic milestone on Monday, reaching an all-time high, which, according to Katie Stockton, the founder of Fairlead Strategies, bodes well for the S&P 500. The DAX, representing the 40 largest publicly-traded German companies, closed 0.21% higher on Monday at a record 16,794, building on the previous day’s peak.

As stock markets often signal economic trends, Germany’s record-setting performance is seen as a positive indicator. Given the substantial trade volume of around $200 billion between Germany and the US in 2021, the close economic ties suggest a parallel movement in the long-term trajectories of both countries’ stock markets.

Stockton highlighted the historically positive correlation between the S&P 500 and DAX, expressing confidence that the recent outperformance of the DAX will persist. Despite the DAX traditionally lagging behind the S&P 500, Stockton emphasized that the DAX’s breakout to new highs serves as a noteworthy example for global equity markets.

The confirmation of the DAX’s breakout came on Friday during the closing of its final resistance level of approximately 16,290. Since surpassing this level in late November, the index has surged 3%, reaching a new high of 16,794. Stockton views this breakout as a bullish long-term catalyst for Germany’s largest economy.

In her client note on Friday, Stockton predicted that the S&P 500 would continue to trail the DAX’s upward trajectory rather than taking the lead. Although the S&P 500 remains about 4% below its January 2022 record high, a bullish breakout on Friday above the crucial resistance level of around 4,600 suggests potential for further gains. Stockton anticipates a decisive closure above this level by the weekend “as a bullish long-term indication, with the next resistance for the S&P 500 at its January 2022 high.”

Read it on Business Insider.

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