Potential signal:
- I am a buyer of the DAX at 22,520 with a stop loss at 22,300 level.
- I am aiming for the 23,000 level at that point.
The DAX has fallen pretty significantly during the trading session on Wednesday to break down below the 50-day EMA only to turn around and show signs of life. By doing so, it suggests that the market is in fact going to continue to consolidate in this area. I do think that makes a certain amount of sense considering that although we are waiting to figure out what's going on with the tariffs, the reality is that traders will continue to look at this through the prism of the fact that the German economy is actually coming out of recession.
I think it allows the possibility of the market continuing to reflect that, the market being the DAX. I would anticipate at this point in time, there will be a lot of noise.
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But if we can break above the recent high, then it opens up the possibility of going all the way to the 25,000 euro level. If we were to turn around and break down below the 22,000 level, then we get a bit of a deeper correction. Ultimately, though, I think this is a market that's just trying to work off some of the froth and perhaps some of the fear of turning things around and take off. Nothing has really changed from a longer term point of view and
Because of this, think you have to recognize that it's very likely that any dip will be bought into. And it's really not until we break down below the 200 day EMA that I start to think about the downside, or if I see some type of massive change with German economic data, but right now it looks relatively robust. The DAX has outperformed all New York indices over the last several weeks, and I anticipate that at the very least you're going to see stability here. The Trump tariffs could cause a little bit of a hiccup. We'll just have to wait and see. But I still favor the upside in Germany.
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