- The German index rallied significantly during the course of the training session on Wednesday, as it looks like we are going to continue to rally.
- The size of the candlestick was rather impressive and it does suggest that we have further to go.
- However, it’s worth noting that there is a lot of noise just above, especially near the €17,000 level, so it may take some work to make it through that barrier.
Technical Analysis
The technical analysis suggests that we are in the midst of firing off a bullish flag, and therefore I do think that the DAX goes much higher. The PMI numbers out of Germany were less than anticipated, so it gives yet another argument for loose monetary policy, which of course is the only thing that traders care about right now. Ultimately, this is a market that will continue to go higher and once we break through the €17,000 level on a daily close, I expect that the DAX will go looking to the €20,000 level over the next several months.
At this point in time, any pullback in this market will be thought of as a potential value proposition, especially with so much support seen at the €16,500 level, and then of course the 50-Day EMA underneath that also offer support. With this, it remains a “buy on the dips” market, much like all other indices around the world as traders get excited about the possibility of multiple central banks out there looking to loosen monetary policy. After all, the only thing that’s really mattered over the last 13 years for the most part has been whether or not there is going to be liquidity, because it fuels asset levels, and therefore the same handful of stocks that drive each index.
If we were to break down below the 50-Day EMA, that would obviously change a lot of things, but right now I don’t see that happening. If we do see that break down, then the €16,000 levels the next area where you see plenty of support. Either way, I don’t have any interest in shorting the DAX, or any other index for that matter, as we have seen so much in the way of FOMO in indices worldwide, and in synchronicity.
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