The German index looks strong on Wednesday but has also found a major resistance barrier to contend with. At this point in time, the market continues to see interest rates and headlines.
DAX
The German index rallied quite significantly during the trading session on Wednesday to pierce the 25,000-euro level which of course has offered a little bit of resistance, but we pulled back from there as well. That being said given enough time I am looking at this through the prism of a market that is probably a little overextended so I think there is a potential pullback just waiting to happen, but that pullback should be a buying opportunity.
It's also worth noting that the gap from the beginning of March has just been filled so technical traders will be looking at this as a potential barrier. If we do drop from here the 24,400-euro level is an area that I would be watching for support and then after that we could be looking at 24,000 euro.
Technical Indicators and Market Sentiment
The 24,000 euro level is a large round psychologically significant figure and it is an area that also has the 50-day EMA as well as the 200-day EMA indicator so I do think that is the massive floor in this market and with the 10-year yields in Germany dropping below the 3% level on Wednesday that is a very strong sign for risk appetite.
However, I do think we are a little overdone in the short term. I'm looking for a pullback to start buying into because quite frankly as Germany goes so will go the rest of Europe. Even if you aren't trading the DAX the market will more likely than not take clues from the DAX as to what to do in places like France the Netherlands Italy etc.