It’s more likely that we chop around sideways than anything else.
The German index fell during the trading session on Thursday as we continue to see a lot of negativity. The DAX has broken below the 50 Day EMA which is a technical indicator that a lot of people pay attention to. By breaking below there, the market is likely to continue seeing downward pressure, perhaps going down to the €14,000 level. Ultimately, this is a market that had recently broken out but then looks as if it’s ready to reverse that move as we are starting to see a lot of negativity when it comes to indices globally.
If we break down below the €14,000 level, then it is likely that the market goes looking to reach the €13,500 level, possibly even lower than that. However, you have to look at this through the prism of the market forming a much higher low than previously, so it’ll be interesting to see at this point whether or not the traders try to put this market into an uptrend, but we have to break above the highs in order to confirm an uptrend, and quite frankly we have not been able to do that. Because of this, it’s very likely that the market is going to continue to be volatile more than anything else.
Keep in mind that the German index is highly sensitive to the global economy as so many of the major players in the index are exporters. The market will have to pay attention to growth in multiple areas, not the least of which will be the European Union. Other economies in Europe are big buyers of German goods. As the rest of the European Union seems to be struggling, that’s going to have a lot of negativity flowing into this market as well.
Furthermore, you need to pay attention to the DAX because it can give you a bit of a heads up as to what’s going to happen in other European indices, and therefore we need to look at is a harbinger for the rest of the continent. However, if we were to turn around and break above the 200 Day EMA, it’s likely that the market goes looking to the €15,000 level, and if it breaks above there, we could go much higher. It’s more likely that we chop around sideways than anything else.