- The DAX has broken above the 200-Day EMA during the trading session on Tuesday, showing even more strength.
- At this point, it looks like the German index is going to go looking toward the €14,000 level as a target. I do think that it is probably only a matter of time before we see that tested, the question is whether we can break above there.
- At this point it’s far too early to tell, but I also recognize that it certainly looks as if we will try to keep the momentum up.
- Whether or not it is a sustainable rally is a completely different situation altogether, and one that I think eventually runs out of momentum.
If we turn around and break below the 200-Day EMA, then it is likely that we see this market breakdown, perhaps reaching toward the €13,200 level, and then eventually the 50-Day EMA. Now that we have broken out between those 2 moving averages, that’s generally a good sign that we are going to continue to try to go higher.
Market Likely to be Positive in the Short Term
Regardless, keep in mind that Germany has a lot of issues, not the least of which will be the fact that we are starting to see concerns about energy in the European Union, and especially Germany. One of the fun facts is that the leaders in Germany continue to talk about natural gas being at “100% of reserves”, which sounds great. However, the reserves that Germany holds is only about 20% of what it actually needs.
Because of this, I think this makes a good trade, but from a longer-term standpoint it’s difficult to imagine how the DAX suddenly takes off, especially as it is so heavily laden with the export companies. There is the seasonality trade that some people look at in order to shore up books at the end of the year, so there might be a little bit of that going on as well. Regardless, I think this is a situation where you have to think about the reality of the short term, and then the reality of the longer-term. At this point, I suspect the market continues to be positive in the short-term but will eventually get smacked down by some random headline. Perhaps it’s just exhaustion from the selling that is also propelling it as well.
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