DAX Forecast: German Index Running Out of Steam

Christopher Lewis

As we start to see traders feel a little bit more comfortable to put money to work, other indices may take away some of the momentum that we see here.

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The German index gapped a little bit higher at the open on Thursday, but then just went back and forth. We are hanging above the €16,000 level, an area that of course will attract a certain amount of attention. We have made an all-time high though, so that is something worth paying attention to. The market is a little overextended, so I do think that it is probably only a matter of time before we see a bit of a pullback. If we were to pull back from there and drop a bit, I think a lot of people will be looking at the market as one that could be offering a bit of value.

Germany of course is a major economy and therefore it is likely that we would see this move right along with the idea of the global reopening trade coming into the picture. With this being the case, I like the idea of looking for value, and the straight up in the air type of attitude we have had recently is probably a bit much to maintain any way. The 50 day EMA currently sits at the €15,577 level and is starting to turn higher. I think that it is an area that a lot of traders will be paying close attention to, and therefore I think it could offer a little bit of value. If we can get some type of bounce or hammer in order to show signs of life, then I think it is likely we see a lot of inflows. Quite frankly, there is nothing on this chart that suggests that we should be selling, and that is the way you need to be looking at it.

If we do see the DAX really get hammered, it is probably going to pay more to short the other peripheral European indices such as the MIB, IBEX, and other smaller exchanges. In other words, think of this more like the “Dow Jones Industrial Average”, as it is so heavily industrial. It is also essentially a handful of “blue-chip stocks” that drive Germany’s index, so this is the first place that money goes running to, but as we start to see traders feel a little bit more comfortable to put money to work, other indices may take away some of the momentum that we see here.

DAX

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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