DAX Forecast: Index Breakthrough Downtrend Line

It will be interesting to see if traders are willing to hang on to this market over the weekend and hold a bullish position.

The German index as a rally during the training session on Thursday to break above a major downtrend line. This downtrend line was at the top of the down-trending channel, so this course is something that’s worth paying attention to. That being said, we are still very much in a downtrend, so we need to be very cautious about trying to get overly bullish here. There are quite a few things to watch in the next couple of days, so I think this is going to be one of the more interesting stock markets that follow.

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The €14,250 level was an area of resistance that we are now threatening, and if we can break above here it’s possible that we could get looking to the €14,500 level. After that, the market could then go to the €14,750 level, where the 200 Day EMA said. At this point, the market rallying would take quite a bit of effort, and I suspect that you are more likely than not going to have to pay attention to other indices around the world to get a feel as to whether or not the “risk-on rally” could continue.

Keep in mind that markets have been sold off rather drastically, but I would also make a counterargument that the most impulsive move as of late was to the upside as we bounced from the lows back in March. We could be seen an attempt to validate that move, so sooner or later you were going to have to go ahead and buy this market if we do continue to see this type of action. I suspect you will probably need to pay attention to the FTSE 100, CAC, and maybe even the MIB to get an idea as to where this particular index may go.

If we were to turn around and break down below the lows of the Wednesday session, then it’s likely that we pull back again, perhaps going to the €13,500 level. While I’m not quite ready to go long in this market, the reality is that we made quite a big move toward that possibility during the trading session on Thursday. It will be interesting to see how this week closes out, and whether or not traders are willing to hang on to this market over the weekend and hold a bullish position. That could be the final clue.