DAX Forecast: German Equities Continue to Recover

• The DAX initially pulled back just a bit during the early hours on Monday, only to turn around and show signs of life again.
• We are back above the €18,250 level, and as I write this article, we are currently testing the 50-Day EMA.
• The 50-Day EMA is of course a technical indicator that a lot of people pay attention to, so it will be interesting to see how this plays out if we can break above there.

All things being equal, this is a market that I think will continue to see a lot of noisy behavior, and therefore it shouldn’t be surprising at all if we get some type of pullback. That pullback should offer a certain amount of value that people are willing to take advantage of, and therefore I think it does continue to create a little bit of a bottom in this market. Underneath there, we also have the €18,000 level that will come into the picture and offer psychological as well as structural support.

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Long-term uptrend

Keep in mind that Germany is still very much in the long term uptrend. This has not changed, despite the fact that we have recently seen quite a bit of noise. The ECB recently cut rates, and that of course had people freaking out, and of course we’ve recently seen inflation numbers in the United States be a little hotter than anticipated, but really at the end of the day equities traders have an uncanny ability to continue to push the market higher regardless of what they hear. I don’t see that being any different in Germany than it is in the United States.

To the upside, the 18,700 level is an area that I think a lot of people will be looking at as a potential short-term barrier, mainly because it was the beginning of the 2 day selloff that was rather nasty. Breaking above that opens up the possibility of a longer-term “buy-and-hold” opportunity, perhaps testing the recent highs that we had seen near the €19,000 level. Anything above there obviously will kick off more “FOMO trading.”

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