The DAX continues to struggle for momentum, as we see energy prices continue to work against it overall. At this point, the noise is deafening.
DAX
The German DAX initially tried to rally on Monday but has since given back some of the gains as energy inflation continues to be a major theme here. There is a very, very dark cloud over the idea of energy pricing for the European Union this winter. By extension, the German industrial base, such as Siemens and BMW, is going to have major input-cost problems.
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If that ends up being the case, then clearly you have a situation where the index itself has issues. There is also a bit of an issue with the transmission of fiscal spending by the government due to heavy regulations in Germany. Although we are seeing several massive projects start, they are stalled.
Looking at the chart, we're still very much in an uptrend
Although we are threatening that at the moment, I do watch the €25,000 level with extreme interest, not only because it is a large, round, psychologically significant figure, but we now have the 200-day EMA sitting there as well.
The market has been slumping for a couple of weeks and is ripe for some reason to bounce, but right now it just does not have it. As long as that is the case, you are going to see the DAX flounder. We are halfway between the 50-day EMA above and the 200-day EMA below, and that is normally a recipe for a bit of choppiness as well.
I do favor the DAX to the upside, and it is by far my favorite index in the European Union at the moment. But that does not mean it is going to take off right away. I am bullish longer term, but recognize it is going to be very noisy.
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