The DAX fell down to the 15,500 level before turning around and showing signs of life to form a bit of a hammer for the trading session. That is a very bullish sign, and could suggest that we may go towards the 15,750 level again, which is essentially the highs. If we can break above that high level, then it is likely that we could go much higher, with the 16,000 level being the first target. If we break above there, then it is just a simple continuation of the overall trend that we have seen for quite some time. Remember, Germany is the first place that people go looking towards when it comes to putting money to work in the European Union.
Underneath, we not only have the 15,500 level offering support, but we also have the uptrend line in the 50-day EMA. It is because of this that if we break through all of that, then you have to start to worry about the DAX. That being said, the DAX is not the index in Europe that you should short, because you will see a lot of negativity in the markets, and I believe at that point you are probably better off shorting some of the weaker economies.
I think at the very least we will see a certain amount of choppy behavior, as the volatility has picked up around the world. Nonetheless, I think that the market remains bullish overall, so buying on short-term dips does make sense. In fact, some of my favorite traders are going long the DAX but may be short some of the other peripheral European indices. This is a market that I think shows a lot of positivity, and you have to look at it through that prism. Nonetheless, we have become acutely aware of the fact that the Federal Reserve has the ability to wreck all markets if they suggest that they are going to tighten monetary policy, because it does have an effect on what happens with the US dollar and global markets in general. I have no interest in shorting, at least not this particular index. This index could be a signal to short other markets, but it is essentially “long only” at this point.