DAX Forecast: Index Pulls Back to Find Buyers

Christopher Lewis

It is almost impossible to short the DAX right now, even though the euro has been strengthening for some time.

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The DAX Index pulled back a bit during the trading session on Monday as traders came back to work. The 13,825 level had previously been resistance, and now it is offering support as one would expect. At this point, I think the market will find plenty of buyers on the dips, even below the area that we just touched. The 50-day EMA underneath is also an area that I would be interested in, which is currently at the 13,360 level.

The DAX reflects the European economy in general, but perhaps more importantly, it reflects the idea of the “reflation trade” as countries around the world continue to stimulate their economies. This suggests that there will be a huge demand for German exports, as the DAX is so heavily laden with export-based companies. We are looking at a scenario in which traders come in and buy the dips going forward, as we have seen in several other indices globally.

The 50-day EMA is pointing higher at this point, and will probably “meet in the middle” when it comes to the overall price and where the moving average is. Either way, it is almost impossible to short the DAX right now, even though the euro has been strengthening for some time. The overall currency headwind is not something that people are worried about right now, so it is a trend that should continue to be followed. In fact, I have no interest in trying to short this market anytime soon, because we have seen a massive amount of stimulus thrown into the marketplace. Furthermore, the DAX is going to be where people look to get involved in “blue-chip stocks” and industrial stocks to take advantage of what should be global growth due to the idea of getting back to work in general. Thinking that we will go straight up in the air is a bit of a stretch due to the fact that we will have rolling lockdowns, and the pattern of the market could reflect that as well. Germany itself has not been immune from the lockdowns, so keep that in mind. Nonetheless, this is an uptrend that I am not willing to sell.

DAX Index chart

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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