- The DAX initially pulled back just a bit during the training session on Thursday, but he continues to see a lot of strength as we have turned around to rally.
- At this point, it looks like we are trying to break out of some type of bullish flag, and therefore to be very interesting to see how this plays out.
- If we can break above the €17,000 level, I think that the DAX could continue to go much higher, perhaps even take off with a bit of “FOMO.”
All things being equal, if we do pull back from here, I think there are plenty of buyers underneath that will come in and pick the DAX market up, with a special emphasis on the €16,500 level, which of course is a psychologically important figure, but we also have the 50-Day EMA racing toward that level, and it is the bottom of the flag.
If you were paying attention to me yesterday, I suggested that perhaps we were going to see a big move one way or the other and eventually take off. I wasn’t sure of the direction because it looks like we have a little bit of a broadening pattern, but it now looks as if the buyers are going to win the day.
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Potential Targets
The potential targets will be the €18,000 level, possibly even the science of the €20,000 level, as the bullish flag has such a huge pole attached to it. All things being equal, this is a market that I think continues to see plenty of values every time they pull back, and the pullback will continue to attract more and more money. After all, it looks like the German economy going into recession has people expecting that the European Central Bank will loosen monetary policy. In general, this is a situation that we see in New York all the time, if the central bank is likely to loosen monetary policy, people throw money at stocks and celebrate a poor economy. This is going to be the case going forward.
That being said, if we were to break down below the 50-Day EMA, then we could drop down to the €16,000 level, which is where we had seen some consolidation previously, and of course the 200-Day EMA comes back into the picture as well.
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