The DAX Index broke down significantly during the trading session on Tuesday as coronavirus figures continue to plague not only the European Union, but other places around the world, spooking investors. A lot of this got kicked off during the Asian session, as Tokyo is talking about a potential third lockdown, and as a result, the Nikkei 225 fell off a cliff. That fear transferred over to multiple European indices, and we have seen red candles across the board.
The market currently sits in a gap that formed after the breakout above 15,000 previously, so it is likely that we will see a certain amount of buying pressure in this general vicinity. The 50-day EMA is breaking above the 14,600 level, and now looks as if it is racing towards the 15,000 handle. The EMA reaching towards that area is simply yet another reason to think that the psychology and the gap will hold.
Furthermore, the German index is the “blue-chip index” for the European Union. With that being the case, it makes sense that we will see a lot of money flowing into this market initially, as people get more bullish about the global economy. It is also the first place money comes out of, so that should be kept in the back of your mind as well. I am simply looking for some type of supportive daily candlestick to get involved, as we have been in an uptrend and I do not see that changing anytime soon. True, this was a very negative candlestick, but it still sits just above a significant amount of support that is worth noting.
As far as selling is concerned, I would need to see this market break down below at least the 50-day EMA, if not further than that. At that point, then I might be able to start shorting; but until then, I think this is simply going to be a buying opportunity based upon the fact that some of the best companies in Europe are situated in the DAX, and the DAX represents the huge industrial powerhouses that will be exporting to multiple nations in order to build up the reflation trade. We are in an uptrend, and at the end of the day that is all that matters.
