DAX Forecast: Index Has Quiet Monday

The German DAX Index rallied a bit on Monday, reaching the €14,600 level in the cash market. However, you can see that we have pulled back a bit to form a shooting star. At this point, the market looks as if it is testing a significant amount of resistance, but at this point, I think we need to find an opportunity to short this market based on recent action. That is not a mean that the DAX is going to fall apart, just that it’s likely that we need to pull back.

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On the other hand, if we were to break above the 200-day EMA, then it’s possible that we could go looking to the €15,000 level. The market will more than likely look at that as a major barrier. Whether we can break above the €15,000 levels is a completely different question, and I think it would be difficult for that to happen right away. At this juncture, I think that a pullback probably will find a little bit of a support level near the 50-day EMA, so don’t be surprised at all to see that we are supported in that area.

If we were to break down below the €14,000 level, then it’s likely that we will go looking to reach down to the €13,500 level underneath, and breaking down below there it’s likely that we would go looking to the €12,600 level. Looking at the chart, it’s obvious that we are trying to break out to the upside, but I think we are going to have a very noisy market going forward, as the European Union has to deal with a lot of noisy behavior, as there are major concerns when it comes to energy supply. Given enough time, we will have more clarity, but it looks as if we are at least trying to turn things around. At this point, I do think that you are more likely going to have a short-term pullback. If we break through the €14,000 level, things get ugly. As we are between the 50- and the 200-day EMAs, it’s likely that things will remain volatile as per usual. I believe that if the European Union is going to recover, then it’s likely that it will show up in the DAX before others. However, if we go the other way, the same can be said.