- The DAX has fallen a bit during the trading session on Tuesday, with the breakdown toward the €14,300 level.
- This is an area that we have been in for a while, and now that we are starting to drift a little bit lower, I think it’s possible that the DAX is starting to rethink its bullish behavior.
- This does make a certain amount of sense because there are a massive number of economic headwinds out there that could cause issues. Remember, Germany is a major export economy, so therefore you need to look at it through that prism.
If we do rally from here, I think there is a lot of resistance between here and the highs of the last couple of days, and the massive amount of noise that we’ve seen in this area probably causes a bit of selling pressure. In that scenario, I think that it is probably going to be a little easier to draw from here than it is to rise, because there could be a bit of an “air pocket” underneath, therefore we could fall quite rapidly.
It’s About Risk Appetite
In that scenario, we could see a lot of downward momentum, perhaps crashing this market toward the €14,000 level. Just below there, we have both the 50 and the 200-Day EMA, and therefore it’s likely that we will see support in that general vicinity. For what it is worth, we have seen the 50-Day EMA cross above the 200-Day EMA, so there’s the possibility that we get a bit of a “golden cross” into the picture.
Ultimately, a lot of this is going to come down to risk appetite, and not much else. If there is a global recession coming, it does make a lot of sense that we would see the DAX be one of the indices that are hit rather hard. In that scenario, not only will the DAX start falling, but the rest of the world as well. Ultimately, this is a situation where I think we must pull back at the very least, if not breakdown. This was an area of extreme resistance previously, so it does make a certain amount of sense that it would come back into the picture. At this point, would not chase the market, and would not be interested in buying it until we broke above the €14,800 level, or we get some type of supportive bounce underneath.
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