DAX Forecast: Continues To Consolidate At Highs

• The DAX has gone back and forth during the training session on Friday as we continue to see markets show a lot of volatility.
• The German index of course is paying close attention to what’s going on in the German recession, and of course whether or not the ECB is going to start liquefying markets.
• After all, central banks do tend to support stock markets given enough time and I think German traders right now are hoping for more of the same here.

A pullback could be coming

I think at this point in time, pullback could be coming in the DAX, and quite frankly that would actually be fairly healthy. Ultimately, the €17,600 level is an area that I think a lot of people will be attracted to. This of course assumes that we can even get down to that level, it is probably worth noting that the 20 day EMA just crossed that area, so it all comes together quite nicely. The DAX has been extraordinarily bullish, and I think ultimately this is a situation where traders will continue to look at this through the possibility of finding value every time it pulls back.

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On the other hand, if we were to break above the highs of both Thursday and Friday, that would be an extraordinarily bullish sign, opening up the possibility of a much bigger move. At that point, I think it becomes more or less a “buy-and-hold market”, which essentially is what it’s been for some time.

In that environment, I suspect that the DAX will go looking to the €18,300 level, followed by the €19,000 level. It’s not until we break down below the €17,000 level that I would consider shorting this market, and quite frankly that’s not something that we are going to see anytime soon. With a very stable euro, I think that this market still has plenty of room to run, as the EUR/USD pair continues to simply grind back and forth without making major issues for not only domestic traders, but for those who are trading in other parts of the world, dabbling into the German blue-chip index.

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