The market has been very bullish for some time, and even though we have recently broken out, it still looks as if we are trying to build up enough momentum to continue the longer-term trend.
The DAX has fallen a bit during the course of the trading session on Thursday, reaching down below the 15,800 level. However, we have seen buyers come in just above the 50 day EMA, so therefore it looks as if we are forming a bit of a hammer, and the hammer of course is a very bullish candlestick. If we were to break above the top of the range, then it is likely that we go looking towards the 16,000 level next. Furthermore, as long as we can stay above that 50 day EMA, then the DAX will look rather bullish. I think is probably only a matter of time before we go higher, but that does not necessarily mean that is going to be easy.
If we turn around a break down below the 15,500 level, that could open up a bit of a correction, perhaps down to the 15,000 level. This is the large, round, psychologically significant figure that caused a bit of a bounce recently, and of course we have the 200 day EMA sitting just below that level. In other words, this is a market that I think needs to break that level before we start to show signs of a trend change. All things been equal though, that seems to be the least likely of scenarios, so I think value hunting will continue to be the way going forward.
If we were to break to the fresh, new highs, then it opens up the possibility of a move towards the 16,500 level over the longer term, but it does not mean that it will happen quickly. The market has been very bullish for some time, and even though we have recently broken out, it still looks as if we are trying to build up enough momentum to continue the longer-term trend. I think this will continue to be based upon global growth situations, as the German index is full of export heavy companies that will continue to put industrial goods in various nations around the world. In other words, the global growth situation slows down, that will be bad for the DAX, although it will do more or less good than quite a few of the other European indices, due to the fact that it is considered to be the “blue-chip index” for the continent.