Keep in mind that the market has been very noisy for a while, and even though we have had a nice move to the upside, we have not changed the overall trend.
- The German DAX Index rallied again Monday but gave back the gains to form a shooting star.
- By doing so, the market looks as if it will continue to hear a lot of noise right around the €13,650 level, a place where we had seen a bit of a gap previously.
- Because of this, it makes quite a bit of sense of the market may struggle here.
Selling Pressure Ahead
Furthermore, it’s difficult to imagine that the German economy is suddenly going to take off due to the fact that there are a lot of concerns when it comes to energy, and therefore it’s likely that we would see a lot of negativity here. Ultimately, the market is likely to continue seeing quite a bit of selling pressure due to the fact that we have seen so much in the way of negativity when it comes to the economic outlook that this market will continue to be faded.
The 50-day EMA underneath should offer a little bit of dynamic support, but I think given enough time we will see a lot of selling pressure to at least test that area. If we break down below there, then it’s possible that we could go down to the €13,200 level.
On the other hand, we could see this market break to the upside, based upon some type of FOMO. If that were to happen, it’s possible that we could go looking to the €14,000 level. The €14,000 level will be psychologically negative, but that does not necessarily mean that it would hold the market. At that point, you would have to see how other stock indices around the world are behaving, because they will all more likely than not move in the same general direction.
The markets are so interconnected right now it’s all about the growth prospects of not only Germany, but the rest of the world on the whole. After all, Germany is a major exporter of goods to various countries around the world, so if the global economy starts to fall, that most certainly will have an effect on the German economy also. Keep in mind that the market has been very noisy for a while, and even though we have had a nice move to the upside, we have not changed the overall trend.
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