The German 30 has pulled back slightly during the trading session on Tuesday, as we continue to sit just above the €15,000 level. It’s worth noting that the market had recently been very impulsive to the outside, so the fact that we are pulling back a bit should not be a huge surprise, especially as the €15,000 level will be a large, round, psychologically significant figure.
That being said, the potential bullish flag has not broken out one way or the other, so it’s just a potential set up at this point. If we were to break above the €15,100 level, then at that point the German 30 very well could continue to go higher, with a potential measure to move reaching all the way to the €16,100 area. Granted, there needs to be some type of momentum into the market, which is something that will in turn be due to some type of fundamental reason.
Germany is a mass exporter of industrial goods, and therefore the overall global economy will have a major influence on the profit of the companies that make up this index. Another thing to keep in mind is that Germany is the engine of the European Union, so this will be the first place that money flows to if stocks start to get hot again in that part of the world. So even if you were to trade another index on the European continent, you should always keep an eye on Germany.
On a breakdown below the €14,800 level, at that point it would more likely than not demand some type of pullback in order to find enough value for people to get involved. That would set up a potential move down to the 50-Day EMA, which of course is a widely followed indicator, and had offered previous support near the €13,900 level. Either way, pulling back to the 50-Day EMA is not necessarily a sign of weakness, just that we need to consolidate a bit more before the buyers come in and take control yet again. Either way, the German 30 looks bullish from an intermediate standpoint.
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