- The German index has rallied quite nicely during the Monday session, as we are now threatening the €18,800 level.
- This is an area that we have seen a lot of resistance as previously, but it’s also worth noting that we have ended up forming a bit of a bullish flag, and I think it’s probably only a matter of time before we break out.
- Whether or not we can do it right away remains to be seen, but I do think that short-term pullbacks will continue to attract a certain amount of bullish pressure.
The German index of course has a massive amount of export influence due to the multinational companies that are involved in this market, and as the Euro has gotten cheaper over the last several months, with perhaps the exception of the last couple of weeks, it does help exports coming out of the country. Furthermore, we also are witnessing Germany exits a recession, so that has traders looking to buy this market as well.
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At the end of the day, the economy doesn’t matter
The reality is that stock markets no longer move on the actual economy though, rather in anticipation of what the central bank will do. As the European Central Bank is likely to cut rates sometime in the next few months, everybody loves the idea of buying European indices and stocks overall. Germany of course is the entry to the EU for most traders, so it makes sense that the DAX continues to find buyers.
The Monday action of course was bullish, but quite frankly when you look at the chart going all the way back to late October 2023, we have only had a few blips to the downside to followed by big move is higher. It looks as if we are in the midst of another bullish flag or pullback if you will, and it also looks like we are in the midst of trying to recover from the pullback. I do believe that given enough time, the DAX will go looking toward the €20,000 level, and I think if you are patient enough, you should see a nice move sooner or later. That doesn’t mean that it has to happen right away, but the reality is that sooner, rather than later, we will see buyers coming back in.
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