The DAX rallied a bit on Wednesday as we bounced from the €13,250 level. That being said, the market is still very much in a negative mood, and it does make sense that we have not been able to hang on to all of the gains for the day. At this point, it looks as if we are going to try to recover some of the losses, but the vicious selloff that we had seen during the previous several sessions does suggest that there is still a lot of negativity out there.
The ECB had an emergency meeting during the trading session but did not announce anything important, and I believe there is probably a little bit of disappointment getting ready to be priced into the market. The DAX is the gateway to the rest of the European Union, meaning that money comes into Germany much quicker than it does in many of the other economies. The DAX is a major beneficiary of this, but at this point in time, it looks as if the market is trying to do everything it can to figure out where we are going to go next. Ultimately, the €13,250 level is an area that you need to pay close attention to. It has been important more than once, so if we were to break down below there, I think it opens up a selling opportunity down to the €13,000 level, and then perhaps even down to the €12,500 level, where we had bounced from previously.
On the upside, the €13,750 level is an area where we could see a little bit of noise, followed by the €14,000 level, which is rapidly being approached by the 50-day EMA. In other words, I believe this is only a short-term rally, and that sellers will reenter the market rather quickly. In fact, when you look at the 50-day EMA and the 200-day EMA indicators, it looks like we are in a very negative trend, and we should continue to see quite a bit of momentum. It would not surprise me at all to see a couple of days to the upside, followed by fresh selling yet again. Looking at this chart, it is not till we break above the €14,250 level that I would consider going long.
