I’m looking for signs of exhaustion that I can jump on because I still believe that the DAX falls over the longer term.
The DAX has rallied a bit during the trading session on Thursday as we continue to see signs of life. That being said, the €13,000 level above could offer a little bit of resistance, as it was the previous support level. If we show any signs of exhaustion near the €13,000 level, then I believe that the DAX will drop rather significantly. At that point, the market is likely to test the lows again near the €12,500 level. It will break down below there, then it’s possible that the overall downtrend continues.
However, the market has recently formed a bit of a “double bottom”, so that might be worth paying attention to as well. That’s also why breaking down below the €12,500 level is such a negative turn of events, opening up quite a bit of selling pressure. That being said, the market is dropping overall, so I still think there is plenty of resistance above. Furthermore, you also have to keep in mind that the DAX is going to suffer at the hands of the German economy in general, which is dropping. Ultimately, we have to worry about things like energy in Germany and other parts of the EU, so it’s very likely that we would see a lot of negativity out there to push the market lower.
However, if we break above the €13,000 level, it’s possible that we could go looking to the 50 Day EMA. The €13,500 level is an area where a lot of attention will be paid as well, as the 50 Day EMA is reaching toward that area. If this era gets broken to the upside, then we can start to talk about a change in trend. At this point, I just don’t know whether or not that can happen, due to the fact that although the ECB cannot get as tight as once thought, the reality is that the economy is going to be in shambles unless we can figure out the energy situation in the European Union, and as we head toward winter, things are going to get really ugly. At this junction, I’m looking for signs of exhaustion that I can jump on because I still believe that the DAX falls over the longer term. However, I am also aware of the fact that there are a few areas above that if we break through, it could change things.