The DAX fell a bit on Wednesday, as the overbought condition finally caught up with the bulls. That being said, this is still a very strong market and continues to attract value hunters.
DAX
The German DAX pulled back significantly during the trading session on Wednesday as we have wiped out a large portion of the gains from Tuesday. That being said, this is a very strong market in general, and it does make a certain amount of sense to consider that this pullback might just end up being a little bit of a buying opportunity before it's all said and done. After all, sooner or later, there are pullbacks as people collect profit or just simple gravity enters the picture, and that might be part of what we're seeing here.
Energy Risks and Middle East Catalyst
The industrial complex in Germany will be paying attention to the energy situation very closely as Qatar is a major supplier of liquefied natural gas and other forms of energy to the European Union. If they find themselves struggling to find natural gas this winter, it could be a huge problem for the EU and, of course, by extension, Germany, as it is the biggest consumer of energy in the trading bloc, especially its industrial base, as it is the largest exporter of industrial goods in the region.
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That being said, recently we've had pretty decent comments and earnings coming out of major manufacturers in Germany. So, if the situation in the Middle East can resolve itself, it's very likely that the DAX will be a major beneficiary. After all, the major export companies make up a huge part of the DAX index, but we also have to keep in mind that the German government is talking about becoming a lot less frugal fiscally, and that means big companies make big profits.
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