The DAX Index rallied significantly on Tuesday as we continue to look towards the €16,000 level. That is an area that has been important more than once, and I think it probably is a market that eventually will see some type of pullback that we can take advantage of on momentum. On the other hand, if we do break above the €16,000 level, then I think the market is ready to go much higher, kicking off its next “buy-and-hold” section. The economic numbers in the European Union continue to suggest that perhaps we are seen a bit of a recovery, so the DAX should be a leader to the upside.
The market has a significant amount of support underneath, as we had gapped higher during the open on Monday and have not looked back since then. With that being the case, I think this is a market that will ultimately find reasons to go higher, but it does not necessarily mean that it will be straight up in the air. I like buying short-term pullbacks and recognize that the 50-day EMA which is sitting just above the 15,500 level is an area that a lot of people will be paying close attention to. Because of this, I would be very interested in picking up a little bit of a pullback that show signs of support, because it is only a matter of time before the overall trend reasserts itself. The market does tend to move right along with the global reopening trade. After all, a huge portion of the German companies that drive most of the DAX are major industrials that do business across the world.
Looking at this chart, I think that you could talk about a potential move towards the €17,000 level, as we are breaking out of the €1000 consolidation range that we have been in. With this, I think the “floor in the market” is near the €15,000 level, especially now that the 200-day EMA is sitting just above it. This remains a “buy on the dips” type of market, as the DAX is a major leader overall. I have no interest in shorting this market, as it is clear that the sellers have been pushed away.
