- You can see that the DAX did rally pretty significantly right off the bat here early Monday morning, but we are starting to see trouble in a very familiar area.
- This area for lack of a better number, I'm going to call 18,250 euro.
- It does look like we are essentially trying to consolidate here.
With that being said, it does make a certain amount of sense that perhaps we will see a market that just bangs around between the 50 day EMA and the 18,250 euro level in the short term. But overall, it is a market that's bullish. This consolidation makes a certain amount of sense after the recent pullback as traders have to test the waters to see whether or not the stock market is where they want to be.
DAX is the Big Market for EU
Furthermore, you must keep in mind that the DAX is the gateway to the rest of the European Union. So as the DAX goes, typically, so goes the AMX, the CAC, the MIB, et cetera. So with all of that being said, even if you're not trading the DAX directly, this is an index that you need to pay close attention to if you have anything to do with equities on the continent.
If we can break above the 18,250 euro level on a daily close, I think at that point in time, you will have a real shot at this market trying to reach the highs again, near the 18,563 euro level. On a pullback, if we were to break down below the 50 day EMA, we could see the DAX go looking to the 17,500 euro level in area that has recently been massively supported. This area being broken below would obviously be a major turn of events, and therefore would be disastrous for not only the German stock exchanges, but for exchanges around the continent, as it is such a big player.
The EUR/USD pair could also give us an idea of how things go, as the German economy is so laden with export based companies. The euro falling against the dollar could also be a tertiary signal for where we go here as well.
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