- The Dax asset looks as if it continues to consolidate just above a significant amount of support.
- With that being said, I think we have to pay close attention to the wicks from three of the most recent candlesticks.
- It's obvious that we are starting to see a little bit of resistance build up near the 18,375 level.
Anything above there, I think really gets people jumping into this market and perhaps pushing higher. But in the meantime, I think we are going to continue to consolidate overall in Germany, which does make a certain amount of sense, considering that it's essentially mirroring what's going on in the euro against the US dollar. I don't know that anybody is overly excited about the European economy right now.
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ECB Cuts Rates
At the same time, even though the ECB has cut rates recently, there are real concerns about whether or not German exports will be bought by the rest of the world, mainly due to the fact that the rest of the world doesn't look that great either. With this, I think sideways action is probably where we are going in the short term.
But if we do break above that €18,375 level, then we could make a move to a much bigger rally underneath. I still see the €18,000 level as important and should offer support, but even if we were to break down below there, I don't necessarily think that it's going to be a major breakdown. I think the €17,750 level will be the next support level, followed by the 200 day EMA and the €17,400 region.
In other words, I remain very much buy on the dip, but I just don't know if we have a whole lot of momentum in the short term because of the overall malaise and the fact that we are in the midst of summer, which typically is quite a bit quieter anyways.
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