- The DAX fell initially during the trading session on Thursday, breaking below the €13,100 level.
- However, it did find significant support near the €13,000 level, and ended up bouncing late in the day.
- This is a sign that perhaps the market is trying to build up enough momentum to go higher, but in the short term it looks as if we are still questioning everything.
From the bullish perspective, you can make an argument that the hammer right at the previous downtrend line shows that the market did in fact break out of a huge wedge, only to pull back and retest the area to find support. That of course is bullish and does suggest that we have further to go to the upside. However, we also must worry about the 200 Day EMA and that of course is a situation that causes some technical problems. If we were to break above the top of the candlestick, then the idea is that we would attempt to reach the highs from a couple of days ago, and then ultimately break above there. If we do, that would obviously be a very good sign.
Downward Pressure Ahead
Breaking down below the bottom of the candlestick would be very negative, and there are a lot of things out there that could send the DAX lower. For example, the European economy itself is an absolute basket case, so it’s very likely that we could see German companies suffer due to the lack of growth around the continent. Beyond that, if we do have a global slowdown on her hands, exports probably won’t be that hot, even though the Euro is extraordinarily cheap now. In fact, it’s likely that the Euro won’t be any help at all, because it’s being sold for a lack of growth.
The market breaking down will then have to deal with the 50-Day EMA, currently sitting right around the €12,850 level. Breaking down below there that opens a move to the €12,500 level. I don’t think that’s going to happen easily, but it is worth noting that we are at a huge decision point, and we of course will have the Federal Reserve influence as well, as we have the jobs number in America that a lot of people will be looking at as a sign of whether monetary policy in America continues to tighten. If it does, that will put further downward pressure on the Arrow, and of course the European economy.
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