- The German DAX initially rallied during the trading session on Thursday but has seen a complete turnaround as we had filled a gap from several weeks ago and then just fell apart.
- Ultimately though, I think I am looking at this market and the 25,000-euro level for clues as to where we are going next.
- If we can break back above that level, it would be a very bullish turn of events, and I think that opens up the possibility of a move to the 25,500-euro level.
If we do continue to break down from here, the 50-day EMA sits right around the 24,607-euro level and the 24,400-euro level both have been supported. All things being equal, I think this is a situation where value hunting will probably continue to be the way forward, but there has been a major risk-off type of event during the trading session on Thursday as traders are worried about the Federal Reserve not cutting rates as rapidly as they wanted.
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Furthermore, we have to keep in mind that the German index is highly driven by industrials that of course sell worldwide and if there is a tariff problem between Germany and the United States, that wears upon some of these major industrials as well. The counterpoint to that of course is the fact that the German economy should be boosted by massive stimulus spending this year and that should ultimately win the argument.
Once we get a couple of great trade deals stabilized and the Germans spending money on infrastructure and larger military improvements, that should ultimately send the DAX higher and I am looking at each pullback as a potential buying opportunity despite the fact that the candlestick was rather ugly for Thursday.
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