- As you can see, the German index has fallen a bit during the course of the trading session on Monday to kick off the week on the wrong foot, but it has since also bounced.
- So, I think at this point in time, it's worth looking at the DAX through the prism of a buy on the dip type of scenario.
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I have said for a couple of weeks now that I think we are going to continue to bounce around between the 19,750 euro level underneath, which is where the 50-day EMA currently resides, and the 20,500 euros level above. This does show that there's a natural proclivity for the DAX to rise over the longer term, but that should not be a surprise at this point. If we were to break down below the 19,750 euro level then, we might have to go looking to the 19,000 euro level. On the other hand, if we were to break to the upside and clear the 20,500 euro level, we could go quite a bit higher. I think we would just grind away to the upside like we did a majority of the previous year. The ECB is expected to keep interest rates low and continue to cut them. So that generally favors the DAX. So that in and of itself could help.
Granted, Europe is a bit of a mess and there's all kinds of problems across the board, but whether or not that drags down the stock market, of course, would be a completely different set of issues. Those cheap euros out there can make German exports somewhat cheaper for foreigners. And that might be what a lot of people are paying attention to when buying the DAX at this point.
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