The DAX was strong to open the session on Tuesday, as we are testing resistance. However, we have been seeing later selling, showing the potential to remain in the recent consolidation area.
DAX
The German DAX has shown itself to be somewhat resilient in the early part of the session, but we have rolled over since the beginning of the day as we are in a major resistance zone.
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Interest rates are starting to pop higher around the world. You can see that both in the United States and Germany, they have risen during the day, and that makes sense. The combination of higher rates and a little bit of technical resistance provides headwinds. The move that we had seen during the trading session on Monday was probably unsustainable, at least for a significant amount of time.
Consolidation holds for the time being
So now it looks like the DAX is still essentially stuck in the same consolidation area. A break above the €26,750 level opens up the possibility of a much bigger move, but right now I don't see that happening. It is probably worth noting that as Germany starts to close out the day, we are forming a bit of a shooting star, so I am looking for a pullback.
This does not mean that I am looking to short the market; quite the opposite. What I am looking forward to is seeing how we react near the €26,000 level. Alternatively, if we take off above €26,750, I will be a buyer up there as well, as the DAX is supported by falling oil prices and, of course, fiscal spending in Germany.
All things being equal, we will have to see what the ECB has to say about things. The ECB was recently very noncommittal about tightening. That could help as well, as looser monetary policy may be a boost for producers also.
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