The DAX has rallied ever so slightly during the trading session on Thursday as we continue to see the uptrend line offer support. The 15,500 level underneath should be somewhat supportive, right along with the 50 day EMA which sits just below there. By those measures alone, we are most certainly in an uptrend, although it has been more of a grind as of late.
Keep in mind that the DAX is the representation of Germany, which of course is the main engine of the European Union. With the 10 year treasury rate in Germany being at under -20 basis points, a lot of domestic money is flowing into the stock market, but traders around the European Union will continue to favor it as well, and that of course the DAX attracts quite a bit of money from both Asia and North America also.
If we were to break down below the 50 day EMA, I think the next major support level would be found at the 15,000 level. Underneath there, then we start to look at the 200 day EMA which is currently at the 14,277 level. I do not think we get all the way down there, but it is something worth paying attention to. With this being the case, I am looking at pullbacks as potential buying opportunities, not only from a short-term standpoint, but also possibly from a longer-term standpoint. I believe that the DAX will go looking towards the 16,000 level given enough time, perhaps even towards the 16,500 level later this year. We are entering the quietest time of the year for equities in general, so we may just simply grind back and forth with a slightly upward tilt.
One thing that I would say about the DAX is that the market falling is quite often a significant sign of bearishness to be found around the European Union. I do not necessarily like shorting the DAX, but if we do see a lot of weakness in Germany, I tend use that as a secondary indicator to start shorting the IBEX, MIB, and other smaller indices on the continent that typically lag Germany in general. In other words, I remain bullish, but if I do suddenly see a lot of negativity here, it will open up trades in other indices for me.
