- The DAX rallied rather significantly during the trading session again on Wednesday as we had gained just about six tenths of a percent. Ultimately, the DAX is a little overstretched at this point. So I am a little bit hesitant to get overly aggressive here as the Relative Strength Index has reached into the overbought condition again.
- But I think this sets up an interesting trade as any pullback at this point in time will more likely than not have buyers coming in to pick up cheap contracts. And in fact, I would love to see a pullback to the 21,000 level, possibly even the 20,500 level.
On a Pullback
A pullback like this is going to offer value in what has been a very strong market. Moreover, it is worth noting that the DAX has the backing of the ECB, as Europeans are likely to cut rates going forward. Ultimately, I think this is a situation where you are simply looking for a little bit of a breather in order to take advantage of what is a very bullish market, and therefore you don't really want to get into a scenario where you are chasing. Also, I think that you could probably say the same thing about a lotof indices. So, I think you have to look at this as an opportunity, but you have to be patient enough, it might take a day or two to come back to you.
I do think that it is almost impossible to short this market. And even if you told me it was going to fall for the next two days, I probably wouldn't bother with it. I would just wait to pick it up. I think that the DAX will go looking to the 21,500 level and then eventually the 22,000 level. But again, we've got to work off a little of this excess that we are currently dealing with.
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