DAX Forecast: Continues to Plunge

Just about anything can happen over the weekend, and in this environment, it’s difficult to imagine whatever that thing is will end up being a good thing.

  • The DAX has fallen yet again during trading on Friday as we continue to see a lot of noisy behavior and of course negativity when it comes to risk assets.
  • The German economy is going to continue to see a lot of trouble, and therefore you would see the market continue to drift right along with it.
  • The 12,500-level underneath has been a massive support, and I think we are going to continue to see also and will be nervous.

If we do bounce from here, I believe that the 50-Day EMA will continue to be resistant based upon technical analysis, but at this point, I think it’s probably a situation where you are simply going to fade rallies anyway. I just don’t see how the DAX takes off, because we have a lot of concerns when it comes to the German economy as we already start to see the possibility of energy rationing. Ultimately, this is a scenario where the markets will continue to have to look at the idea that manufacturing may slow down or even stop in Germany this winter, which is going to be very destructive, to say the least.

Risk Aversion Likely to Hinder The DAX

When we do break down below the €12,500 level, I anticipate that this market will go much lower, with an initial target near the €12,250 level. The size of the selloff recently has been right in line with the gradual chipping away at a major support barrier, so I do think this happened sooner or later. The fact that people were not willing to hang on to positions in the DAX heading into the weekend should not be a huge surprise, as the markets will shun anything risk related in this type of macroeconomic environment. Just about anything can happen over the weekend, and in this environment, it’s difficult to imagine whatever that thing is will end up being a good thing.

Fitting short-term rallies continue to be the way forward until we break down through the floor. That’s the very essence of the market, as we have been forming a descending triangle. With this, I think we’ve got a situation where it’s the same as it has been for several months, and we are probably light years away from seeing the DAX turn things around for a bigger move.

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Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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