The German DAX rallied a bit during the trading session on Thursday as we had broken above the 24,400-euro level only to turn around and show signs of exhaustion.
By doing so we ended up forming a little bit of a shooting star and it suggests that perhaps maybe we're getting a little overdone in the short term.
I think a pullback here offers a little bit of a buying opportunity in the DAX index and I also recognize that the 50-day EMA as well as the 200-day EMA hanging around the 24,000-euro level is a bit of a floor as well. As long as we can stay above the 24,000-euro level it's likely that market participants will continue to find dips as buying opportunities.
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Watching the 10-Year Yield
If we can break above the high price on Thursday, then it opens up the possibility of a move to the 25,000-euro level. I have no interest in shorting this market and I do think that given enough time we will see this market release upward momentum.
After all, the Germans are likely to be very fiscally stimulative for the year, and this will make a huge difference for German equities. All things being equal I'm watching the 10-year yield in Germany and seeing whether or not we can break below the 3% level again because I think that would turbocharge the bullish behavior.
I anticipate a lot of choppy behavior, but I do think that there are plenty of buyers underneath willing to get involved. This is a “buy on the dip” market, and I think that will continue to be the case going forward.
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