The DAX Index rallied a bit during the trading session on Monday but continues to see a lot of trouble right around the 15,800 area. This is an area that has caused the market to pull back multiple times, and as the market looks very strong, it is not strong enough to break out yet. If we can get above that level, especially on a daily close, then I think the market is likely to go looking towards the 16,000 level rather quickly, which is the next psychologically important figure. That being said, I think it is only a matter of time before we see the market break above there, because it is just another large number, and breaking above the 15,800 level would be a major breakout of a bigger consolidation area.
To the downside I see the 50-day EMA coming into the picture and offering a bit of support at the 15,525 region. The 15,500 level itself is somewhat psychologically important and you can see it has offered support more than once in the past. That being the case, I look at that as “fair value” in the overall picture of recent consolidation as it is essentially halfway between the support and resistance.
If we are to break down below all of that, then we will retest that 15,000 level which I think will be crucial for the longer-term health of the DAX. The 15,000 is crucial for this market mainly because of the psychology and the previous structural support there. Beyond that, we also have the 200-day EMA coming into the picture and it is worth noting that it could help the market lift itself.
Once we break down below the 15,000 level and the 200-day EMA, it is very unlikely that we will be able to maintain the bullish attitude. Again, with most stock indices it is all about risk appetite, and in this case, it comes down to whether or not the German index is going to see positivity in the EU short term, or if we need to cool off a bit. One of the things that might help is the fact that the euro is dropping a bit, possibly making exports a bit cheaper. Ultimately though, given enough time, it is likely that we will eventually go higher.
