I think the DAX could be a major move to the upside just waiting to happen. However, there is some work to be done before that can occur.
DAX
The German DAX was slightly positive during the early hours on Tuesday but continues to see a lot of pushbacks above the 25,000-euro level. Quite frankly, this is a scenario that I think eventually resolves to the upside as the German government continues to throw money at the German economy in the form of industrial benefits, military build-up, and of course infrastructure.
With all of that being said, it is a major tailwind for the DAX this year, but we also have issues with trade, specifically the United States, which continues to hurt the DAX.
Bullish Outlook and Support Levels
I think over the longer term the stimulus will win out, and we will see the DAX rally. As things stand right now, it looks like the 24,750 level is an area of support as the 50-day EMA is reaching that area, and then the 24,250 level is also support.
So, I like buying dips in the German index. I don't necessarily want to short this index anytime soon, but I do recognize that it might be a bit noisy. I'd rather buy it on the dip if I get the opportunity.
However, if we were to get a daily close significantly above the 25,000 level that could lead to the next shot higher, which by my calculations could send the DAX to the 27,000-euro level over the longer term. I have no interest in shorting, and quite frankly, if the DAX does start to fall apart, you probably get more traction in some of the smaller US indices such as the Russell 2000 or possibly some of the smaller European indices such as Amsterdam or the IBEX in Spain. Keep that in mind.
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