During the training session on Tuesday, the DAX pulled back slightly in Germany to show signs of hesitation. Ultimately, this is a market that has been a little overdone recently, so it does make a certain amount of sense that we would pull back. That being said, this does offer the possibility of value for those looking to get involved. The €16,000 level underneath should be psychological support, as it was previous resistance. Ultimately, this is a market that has been leading the way in the European Union, but it needs to be stated that there is just a handful of companies that are keeping the market afloat at the moment, much like you see in the United States.
On the upside, the €16,500 level could offer a little bit of a resistance barrier, and we certainly did shy away from it a couple of sessions ago. Having said that, it is more likely than not going to continue to be a scenario where the DAX and indices in the European Union in general, are going to continue to be more of a “buy on the dips” situation.
DAX finding some buying pressure in certain level
It is not until we break down below the 50-Day EMA that I would be somewhat concerned, and even then there are plenty of areas underneath it could come into the picture to offer buying opportunities. It is difficult to short the DAX at the moment, as it has been so strong for so long. Ultimately, this market will continue to be very noisy, but there seems to be quite a bit of buying pressure near the €16,000 level that should continue to act as a short-term floor. On a breakout, the DAX could go as high as 17,000 over the next several €17,000 over the next several weeks, something that would be right in line with the type of momentum that we have seen for months.
One external factor to pay close attention to would be the cross rate of the EUR/USD pair. If the Euro continues to strengthen quite drastically, that could cause a little bit of negativity in the index, as traders will be concerned about German exports slowing down.
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