The DAX fell rather significantly on Tuesday to reach down towards the 15,225 level. At this point, the market is ready to test the lows, and if we break down below the lows from last week, we are then going to be in trouble and start looking towards the 200-day EMA for the next support level. Furthermore, the 15,000 level is sitting just above the 200-day EMA, so both of those are technical reasons to think that perhaps we could see some type of buying pressure.
The size of the candlestick is very negative, so that is worth paying close attention to, because typically these larger candlesticks suggest that there is going to bit of follow-through going forward, and as a result I think we are setting up for a big fight over the next 24 hours or so. Indices around the world continue to worry about the overall growth situation as there are a lot of trouble spots out there that people are paying attention to. At this juncture, the DAX is going to have to pay attention to the idea of the reopening trade, as a majority of the big companies on the DAX are major industrial corporations that countries around the world import from.
The euro falling could give the DAX a little bit of hell, but at the end of the day it is difficult to see this as a market that is simply going to turn around and take off. Depending on how cautious you are, you may be better served waiting for a daily close above the 50-day EMA before getting long. On the other hand, at the first sign of support and a bounce, the more aggressive traders will be getting long at that point.
Regardless, if we break down below the 200-day EMA and the 15,000 level, then it is likely that we will continue to go lower, perhaps reaching towards the €14,750 level, maybe even down to the €14,500 level. As the world becomes a little bit more “risk off”, then the market is likely to fall. However, if we get a bit of a restoration to global confidence, then the DAX will be one of the first places that people jump into.
