This is a situation where I think if you are careful enough, you should find several shorting opportunities.
- The DAX bounced right at the very bottom of the overall consolidation area, which is the €12,500 level.
- This is an area that has been important multiple times, and the fact that we bounce from here is probably worth paying attention to.
- Having said that, it’s probably worth noting that we continue to make “lower highs”, and therefore it looks as if the downward pressure continues to overwhelm the market.
- This is not to say that we cannot rally from here, but I do think that it is probably only a matter of time before the sellers come back in.
When you look at the European Union, it is an absolute rack just waiting to happen. After all, you have a situation where the war in Ukraine continues to drag on, and that obviously has a lot of negative influence on the market. One of the biggest problems of course is going to be the fact that Germany is going to run out of energy before it’s all said and done at this point. The manufacturing sector is a huge part of German strength, so I do think that you need to pay close attention to any potential manufacturing closings. If they do not have energy, they will not be producing anything.
Waiting for a “Fade the Rally” Scenario
Furthermore, Germany desperately needs customers, meaning the rest of the European Union needs to get its act together. It is because of this that I think we continue to see a “fade the rally” type of scenario in this market, and this almost certainly favors looking at the 50-Day EMA as a potential ceiling, if we even get to that area. Even if we break above there, the 200-Day EMA is just below the €14,000 level, and therefore I think that is your absolute ceiling in the market. It’s not that we break above that area that I think the downtrend is broken, something that is not going to happen anytime soon.
This is a situation where I think if you are careful enough, you should find several shorting opportunities. When we finally break down below the €12,400 level, then the market really starts to unwind at that point, perhaps making its way back down to the €12,000 level initially. After that, we could be looking at €11,500.