The DAX initially rally on Monday to slam into the €14,750 region. This is where the 200-day EMA resides, so a lot of technical traders probably started to get short in that area. At this point, the market is forming a bit of a shooting star for the training session, and looks as if we may be running out of momentum. If we break down below the bottom of the candlestick, then could perform the necessary move to get others to short the market.
That being said, I don’t think it’s going to be easy to short the DAX, as there is so much noise just below. More likely than not, we will see a lot of noise in this general vicinity, as traders try to figure out what they’re going to do next. That being said, if we were to break above that 200-day EMA on a daily close, it almost certainly sets up a huge fight at the €15,000 level. A lot of this is going to come down to how people view the European economy, as Germany is by far the biggest part of it.
The DAX also is made up of a lot of exporting companies, so you will have to pay attention to the global economy, and how it performing to see whether or not there is going to be demand for goods from these companies. If the global economy starts to shrink again, that will certainly be filed in the DAX, although it may not be as prominent as it will be in some of the other indices on the continent. After all, the DAX is considered to be the “blue-chip index” for the region, so this is the first place money runs to. It’s also the last place money runs from.
If we fall from here, the 14,250 level has structural support, as well as the 50-day EMA sitting right there as well. Because of this, I think it’ll be a very interesting place to see how the market behaves, and it could give you a bit of a “heads up” as to where we are going longer term. It certainly looks as if we have been rather bullish as of late, but one could make an argument for a bit of a rising wedge as well.
