- The DAX has initially fallen during the trading session on Tuesday but has found enough buyers underneath to turn things around.
- The 200-Day EMA is sitting right there, so it does make a certain amount of sense that there would be technical buying in this region.
- Furthermore, the shape of the candlestick is a hammer, and that of course is very bullish. If we can break above the top of the candlestick, then it’s possible that the DAX could start to head back into a bullish trend.
It’s probably worth noting that the market has a major resistance barrier near the €14,500 level, as we have tried to get above it multiple times. That might be the target that we are aiming for right now, as we had just pulled back from there. Because of this, I think a lot of traders will be looking at this through the prism of risk appetite, which of course is something that might be a bit scarce at this point of the year. The market will continue to be very noisy and could enter a little bit of a trading range at this point. Bouncing around between the 200-Day EMA and the previous resistance would make a certain amount of sense as people are looking for some type of range to trade from, but if we can break above there is a clear breakout for the DAX and causes this market to go much higher.
Market Likely to be Very Noisy
Ultimately, it does look as if we are trying to bounce but if we were to break down below the bottom of the hammer, that would obviously be very negative, perhaps sending the DAX down to the €13,000 level. In that scenario, we would probably see other indices around the world falling, therefore I think you have a situation that would be a complete “risk off” type of situation.
This is a situation where the market has been very noisy, and I think that will continue to be the case as we are heading into the holiday break. Keep in mind that liquidity becomes an issue, so news can also have a major outsized effect on how the markets move. Make sure that your position sizing makes sense with all this trouble just waiting to appear in one direction or the other.
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