- The German index went back and forth during the day on Tuesday, as we continue to hang above the €23,500 level, an area that previously had been a major resistance barrier.
- In other words, we have seen the market react to “market memory”, so it does make a certain amount of sense that we hang out in this overall region.
- Full disclosure, I am bullish of the DAX at the moment, especially if we start to see the Euro lose a little bit of momentum, as it could make exports out of the European Union a little bit more palatable for the rest of the world.
Germany Leads the Way
When you are trading in Europe, the first thing you need to pay attention to is what’s going on in Germany. Unless it is a German centric problem, you will see the DAX lead the other indices higher or lower. For example, if the DAX is rising rather rapidly, then it seems to have a bit of a “knock on effect” with the MIB in Italy, or the IBEX in Spain. Ultimately, this is a market that continues to see a lot of upward mobility, and it is worth noting that we had just massively bounced from the lows near the €18,800 level, and we may need to digest some of these gains for a while. If that’s the case, then we may see a little bit of stagnation in the EU, at least as far as equity indices are concerned.
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Even if we do pull back from here, I think the €22,500 level end up being a major support level, followed by the 50 Day EMA. The 50 Day EMA continues to be for most technical traders, and I suspect that it might be used as an area of value to get involved in a market that has been very strong for a while. There are plenty of people out there that will love to get a piece of this action, so I suspect this is a “buy on the dip” situation.
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