The DAX jumped early on Wednesday, as the ceasefire pushed money back into risk assets around the world.
DAX
The German index rallied quite nicely during the trading session on Wednesday, breaking above the 24,000 level, but had given back some of the gains later in the day as the announcement of the ceasefire of course got people excited. We have seen quite a bit of bickering and arguing since then, not to mention the fact that there have been a couple of minor attacks here and there throughout the region.
With that being the case, it does make a little bit of sense that the DAX, which is overextended at this point, gives back some of the gains. The real question will be whether or not the 200-day EMA can hold as support or if we have to drop towards the 50-day EMA for buyers to get involved.
I would not be someone chasing the DAX right now, despite the fact that it was only at the time of writing a 1.3% gain, nothing extraordinary. The reality is we have shot straight up in the air over the last 2 weeks or so.
Geopolitical Tensions and Energy Concerns
Ultimately, I do think the DAX goes higher, assuming that the situation in the Middle East finally settles down. Most of my problem with German companies at the moment would be a concern about energy.
If the Middle East ceasefire can truly take hold, then that should help with energy concerns in Germany and its massive industrial base. If it doesn't, then the DAX will absolutely crushed yet again.
Ultimately, I am looking for dips to start buying into, but I also recognize that one wrong headline could turn this whole thing around and therefore position size needs to be very small, not only in the DAX, but pretty much anything you are trading.