- The DAX pullback during the trading session on Wednesday to reach toward the €13,250 level.
- We recently broken a trendline, but we are still well below the 200-Day EMA, perhaps offering a bit of resistance just above.
- Furthermore, there are a lot of dreamers out there, who seem to think that the central banks are going to step in and start saving everybody.
- That may be true in some regions, but the Federal Reserve, which is by far the most important central bank in the world, has no interest in doing that right now.
If inflation is a major issue in the United States, the central bank policy of the United States will be one of tight monetary policy. This makes a lot of international transactions very expensive, and as the DAX is full of large international corporations, the export market will continue to suffer. Furthermore, inflation in many parts of the world is making demand stopped cold. This is not conducive for a strong DAX over the longer term, but we do what price tells us to do, not what price “should do.”
DAX Likely to Keep Struggling
At this point, if the market was to break above the 200-Day EMA we could have a big move to the upside. However, I must question whether or not we are starting to run out of momentum, or if we are to simply grind away sideways to work off some of the recent froth. Stock markets tend to move in the same overall direction worldwide, so it’ll be interesting to see how this all plays out. I think at this point, the market could very well go lower and look for the 50-Day EMA as well. That is roughly €12,800. It’s worth noting that the previous high is right around where the 200 Day EMA is as well, so that would make a move above there even more impressive as it would completely smash through the structure of the longer-term market.
The Euro is continuing to struggle to find any type of strength, and that does in theory make exports cheaper, but at the end of the day, if all your customers are broke it probably won’t matter how cheap your goods are. Furthermore, the European Union must worry about energy this winter, not something that most developed markets have to deal with.
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