- The DAX rallied significantly during the trading session on Thursday, only to give back the gains.
- The 17,000 euro level is an area that traders continue to pay attention to and I think at this point, we are trying to determine whether or not we can continue the overall momentum.
- Momentum seems to be the only thing that drives stock markets these days, and of course the DAX will be no different than any of the other major ones.
A short-term pullback at this point in time is likely to be a buying opportunity. The 16,700 euro level is an area that has been supported multiple times and therefore I think that what we've got is a situation where we have plenty of buyers, especially with the 50-day EMA reaching towards the same area.
Multiple External Forces
The DAX Index of course is probably going to follow what happens with the Euro, the Euro-centric other stock markets, the ECB and everything else. This is all about Germany going into a recession which, although counterintuitive, that's good for stocks. And the reason being is they're going to get plenty of liquidity coming out of the European Central Bank. Europe has been infected with the same disease that the United States has had where it's all a play on monetary policy. Even if we were to pull back rather significantly, the 16,500 level is a significant floor. So don't ignore that either. We're in an uptrend. We had recently formed a massive bullish flag and now it looks like we're trying to find a reason or build the momentum to melt up.
It's not until we break down below the 16,300 euros level that I begin to question the uptrend, and even then, you'd still have to have some type of fundamental reason to think that stock markets will start to shrink in Germany. The looks very unlikely to happen in the short term, so I think at this point in time it is just an afterthought. Ultimately, the DAX will continue to be a place where money goes flying into, and therefore I think the short-term pullback is yet a situation where we try to find more buyers underneath.
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