- During my analysis of indices around the world on Thursday, the German DAX is interesting to me due to the fact that we had initially sold off quite drastically, but it turned around to show signs of life.
- At this point, I think the market is most certainly still in an uptrend, but we have a lot of volatility to chew through, as market participants try to sort out whether or not there is going to be a tariff war, or perhaps Donald Trump was just blowing hot air.
The reason I say this is that he has pushback tariffs on Canada and Mexico yet another month, suggesting that he isn’t actually going to do this. If that’s going to be the case, then the Europeans will almost certainly celebrate as the German economy is exiting a recession, and this should be good for earnings overall when it comes to Germany.
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Technical Analysis
Technical analysis for this market is very bullish, but I also recognize that the market is a little overdone. At this point, it would not surprise me at all to see the DAX end up in the consolidation range, and that consolidation range of course would be something worth watching as the market would eventually build up the necessary inertia to break out to the upside and break down below the €22,000 level.
If we were to break down below the €22,000 level, then I think it’s likely that the market will go looking at the 50 Day EMA near the 21,500 level. On the other hand, the market were to break higher, and breaking above the €23,000 level would be a very bullish sign, and almost certainly have traders looking to get involved in the next leg higher. While I think that we may have a little bit of noise in the short term, I do expect this to eventually be the reality of this market, as we have so much inertia underneath and of course so many reasons to think that the DAX will continue to lead the way in Europe.
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