The German DAX Index went back and forth on Monday as traders still have no real clue as to what they want to do. The €12,775 level has seemingly held for the session, but we are drifting lower overall. Remember, as Germany goes, so goes the rest of the European Union. In other words, this is a chart you should be paying close attention to, because it will have an effect on other indices such as Paris, Amsterdam, and Milan. Furthermore, it can also have an effect on the euro and vice versa.
The fact that we are continuing to slide lower tells me that we have further to go, and rallies at this point in time should be looked at with the utmost suspicion. In fact, I think of them as “gifts” for those who jumped in and tried to front run any type of bounce. Furthermore, if you have the ability to short this market, may very well find this a tempting set up on any signs of exhaustion after a bounce.
Take a look at the €13,600 level, it looks as if it is a ceiling in the market, and that’s only assuming that the market can break above the €13,200 level, which I’m not entirely convinced that it can. Ultimately, it’s more likely that we continue to break down and reach toward the €12,600 level, followed by the €12,500 level. Anything under there would have me looking for €12,000 rather quickly.
Keep in mind that DAX is highly levered to global trade, as most of the major players on this index are massive exporters of industrial goods. Because of this, the DAX will continue to suffer due to the fact that it looks like we are heading into a global slowdown. In that scenario, there’s no real reason to think that stocks go well, be it in Germany or anywhere else. The market has been very noisy to say the least, but the one thing that has been clear at this point is that sellers certainly have the advantage. Ultimately, this continues to be a market that I want to take advantage of every time it tries to recover and shows a long wick to the upside. We would need to break above €13,600 to even begin the conversation of this market looking bullish.
