The DAX Index has broken through major support level during the trading session on Friday, slicing through the €12,500 level. This is an area where I think you continue to see a lot of “market memory”, so we do bounce in here I would not be surprised at all to see the market selloff on an attempt to get above there. The size of the candlestick is very negative, so you should pay close attention to that as well. Typically, candlesticks that have this type of size are ones that you see a follow-through in, so I think there are plenty of sellers out there.
DAX 40 Breakdown Scenario
- The inverted hammer from the Thursday candlestick is worth paying attention to, and if we were to break above there, that would obviously be a very strong sign.
- I think there are plenty of resistance above there to continue threatening any buying pressure.
- After all, the DAX has been in a downward trend for a while, and it is worth noting that every time we have bounced from the crucial €12,500 level, we have seen a “lower high” form.
Breaking down below the bottom of the candlestick for the trading session on Friday would open up fresh selling, perhaps sending the DAX down to the €12,000 level. The 50-Day EMA sits just below the €12,200 level and is dropping. Keep in mind that the DAX continues to be negative due to the fact that the German economy has seen a lot of negativity, and there of course lies the problem. After all, the inflation situation in Germany is going to be a major problem, and of course the fact that there is almost no way to get out of the energy situation, it’s difficult to imagine why the DAX would take off.
Furthermore, the global economy continues to slow down, and that is going to cause problems for Germany as well. The DAX is full of companies that are major exporters, so it does need external help at times. The Euro plunging normally would help with exports, but it is falling due to just how toxic the environment is in the EU. I have no interest in buying this market, I think you will have plenty of opportunities to short this market on each rally.
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