- I have been paying close attention to an uptrend line that has been important in this index for several months now.
- We did touch it during the early hours on Friday, but I would also point out that we have a lot of support underneath, especially near the €18,000 level.
- In other words, I think there are a lot of things in play here that could turn the DAX around completely.
That being said, this is also an index that has sold off quite aggressively over the last couple days, and even though I am partial to this index, I’m the first to admit that it’s been very difficult to hang on to a position. Furthermore, we have seen a lot of ugliness in the United States, mainly due to the fact that there has been a lot of stock rotation. It is possible that we are seeing that happen in Germany as well, meaning that perhaps some of the bigger companies are being passed up for smaller ones.
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Germany leads the Way
Remember, Germany leads the way for the rest the European Union so regardless of whether or not you are trading the DAX, this is an index that you should be paying attention to. This is a market that represents the largest economy in the European Union, and of course the European Union is a bit of a mass at the moment. However, if the euro starts to drop in value, it is possible that we could see the text be a beneficiary as people start to think about the idea of exports being cheaper.
If we can turn around and recapture the 50-Day EMA, then it’s possible that the market could go looking to the €18,650 level. That’s an area that’s been important multiple times, so if we were to break above there it would be a very bullish sign. Ultimately, I think the one thing that we should continue to be paid close attention to is whether or not stocks in general rally, because if they do, most indices around the world will move in the same overall direction.
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