The DAX initially tried to rally during the session on Tuesday but gave back gain rather quickly, and now looks as if it is extraordinarily vulnerable to selling pressure. The fact that we ended up forming a bit of the shooting star is also a bad look, compounded by the gap lower they kicked off the week on Monday.
The German index of course must worry about the German economy, which is in a world of trouble. Inflation numbers continue to tick up, and people are starting to suck about the ECB possibly raising interest rates by 75 basis points. I don’t think it matters if they do or not, the German economy is going to be under a lot of stress in the short term. Because of this, I anticipate that we will continue to see stocks in Europe get hammered.
Market Awaits Noise
- If we break down below the bottom of the candlestick, at the very least you would anticipate that we make a return to the bottom of the Monday candlestick. That calls for a move down to the €12,750 level, but I think we probably extend down to the €12,500 level.
- This market has been very noisy as of late, but you can see from the Fibonacci tool that I had drawn a while back, that we pulled back to the 61.8% Fibonacci level before plummeting again.
- This is somewhat common, and therefore I think we’ve got a scenario where the sellers have simply taken a bit of a break and then continued.
On the other hand, if we did somehow break above the top of the shooting star, then the market probably tries to get back to the 50-Day EMA, presently sitting right around the €13,400 level. At this point, the market is likely to see selling pressure yet again. I have no interest in buying the DAX, nor do I have any interest in buying stocks in general. Yes, the United States will probably outperform Germany, but I don’t even want to own those stocks. Keep in mind that the volatility is rather wild, so you need to keep your position size reasonable as we are going to see plenty of noisy behavior, and therefore you can’t trust anything since there are random headlines that will continue to cross the wires.
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