Potential signal:
If we recapture the €18,000 level on a daily close, I’d be a buyer of the DAX. At that point, I would put a stop loss at €17,785, and a target of €18,550 would be my plan.
The DAX fell significantly during the course of the trading session on Thursday, as went now looks like we are threatening the 50-Day EMA indicator. This is an area where we have seen a hammer form recently, so it’s very important that it holds. We could be looking at a major decision as far as the longer-term trend is concerned.
We are below the €18,000 level, and that of course is something that makes quite a bit of sense that people will be paying attention to. All things being equal, the market is likely to find buyers in this area, but if we were to break down below the hammer from the Friday session of last week, that would be extraordinarily negative. At this point, the €17,450 level being broken opens up the possibility of a move down to the €17,000 level, which sits just above the 200-Day EMA.
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In general, this is a market that is very noisy, and of course it’s going to be paying close attention to the German economy, as well as the broader European Union economy. In general, I think ultimately you have a situation where the market is still very much in an uptrend, but the question is now whether or not this is a simple pullback, or is it something a little bit more nefarious?
Global Risk Appetite
Keep in mind the global risk appetite as a part to play in this market as well, as the DAX is considered to be the gateway to Europe for a lot of equities traders. The size of the candlestick on Thursday is somewhat concerning but is not necessarily fatal. At this point, if we can recapture the €18,000 level, that would be a huge boon for buyers and bullish traders, and I think at that point in time you might see more momentum jumping into the market. In that environment, we could reach the highs again rather aggressively, but we need to see the initial move first to get excited about this point.
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