- The DAX has rallied to reach the 50-Day EMA during the trading session on Monday, as we have seen a little bit of recovery.
- At this point, the market will almost certainly see quite a bit of noisy behavior, but I also think that the market will continue to have a lot of things to worry about.
- Not the least of which would of course be the energy situation in the European Union, so therefore I think we’ve got a situation where you’re looking for signs of exhaustion the concert selling.
If we were to break down below the €12,500 level, then it’s possible that the market will continue to go even lower, perhaps even reaching down to the €12,000 level, which is basically the equilibrium of the most recent consolidation area. Anything below there opens up the possibility of a move down to the €11,500 level, possibly even down to the €11,000 level.
Anything is Possible
Looking at this chart, you can see that we have been in a downtrend for some time, and I think that probably continues to be the case, especially as the situation in Germany will only get worse through the winter. As industry will be forced to cut back on energy consumption, it will almost certainly drive down the possibility of a big move higher in the stock market. Furthermore, the Federal Reserve is continuing to tight monetary policy, so that’s going to drive down demand with one of Europe’s biggest trading partners, the United States.
The size of the candlestick is somewhat interesting, but really at the end of the day it looks like we are just running into the same resistance that we did during the Friday session. The Friday session was a nice shooting star, but we did not break down below the bottom of it so I think at this point we are still trying to figure out whether or not we are going to bounce around in this area, or if we are finally going to break down a bit.
If we do break above the 50-Day EMA, then it’s possible that we could go looking to the €13,500 level, which is closer to the 200-Day EMA. I think given enough time, there would be sellers in that area as well, but anything is possible so keep that scenario in the back of your mind.
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