- The DAX Index has gone back and forth during the training session on Wednesday, as we continue to see risk appetite all over the place.
- It looks like the 200-Day EMA is coming into the picture to offer a certain amount of support.
- The market sitting on top of that does suggest that perhaps there could be buyers, but I would not get overly aggressive at this point.
- After all, we are a little extended, and the €14,000 level above could offer some issues.
DAX Index Upside and Downside Scenario
On the other hand, if we were to break down below the bottom of the candlestick from the Monday session, then I think we have a real shot at breaking down toward the €13,000 level. Ultimately, this is a market that has broken above a major downtrend line, so does suggest that perhaps we are looking at a market that’s trying to recover, perhaps based upon the idea that the ECB will loosen monetary policy, but I think most traders are overlooking a lot of the dangers out there right now.
Looking at the start, I think that we could go as high as €14,000 after some type of pullback, but if we were to break down below the pulse of candlestick from last Friday, then we really could start to see the DAX ballpark. The 50-Day EMA could offer the next support level but breaking down below there then opens up the possibility of a move down to the €12,500 level. Below there, the trap door opens and who knows where we end up, probably at the very lows that we had made the last couple months at the very least.
I do think at this point in time, the market is likely to continue to see a lot of noisy behavior, this is why I believe that we are more likely than not going to see a pullback. Quite frankly, we have just gotten far too ahead of ourselves, but I do think that it could offer a little bit of value as long as people are focusing on the “cheap Euro” and what it does for exports. Keep in mind that the Federal Reserve comes into the picture on Thursday as we have CPI numbers coming out, that of course has an influence on the exchange rate, which by extension has an influence on this export driven stock index.
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