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DAX Forecast: Sharp Decline Signals Correction

It's very difficult to buy the pullback, but yet that's where a lot of the big money is made, so you do need to be aware of that.

  • The German index initially tried to rally a bit during the trading session on Tuesday, but then collapsed.
  • At this point in time, I think it is due for a significant correction, and therefore, I am going to pay close attention to Fibonacci levels because we have seen such an extended run.

We are seeing stock markets around the world sell off, so I think at this point in time, traders are starting to worry about the idea of whether or not inflation sticks around, and therefore it's starting to be reflected in pricing of stock indices.

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    Keep in mind that the DAX is the biggest index in Europe, and a lot of people will be paying close attention to it. With that being the case, I think you've got a situation where you have to look at this through the prism of buying the dip, but you also have to wait to let the market tell you when that's going to be. The market could easily fall all the way down to the 17,700 euros level and still be extraordinarily bullish, such has the rally been so strong.

    DAX Forecast Today 03/04: Sharp Decline (graph)

    Ultimately, I think you've got a situation where traders continue to look at this and try to find value, but it is so overextended at this point, a significant pullback is desperately needed. In general, I think this is a situation where you need to be very cautious, but you also need to recognize that sooner or later you'll get an opportunity to pick up value. Remember, a lot of the time it's the most difficult trade that you need to take and it's easy to buy into a rally like this.

    It's very difficult to buy the pullback, but yet that's where a lot of the big money is made, so you do need to be aware of that. With that being said, I am on the sidelines patiently waiting for signs of support because the DAX of course has been one of the big winners this year.

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    Christopher Lewis
    About 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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