DAX Forecast: Don’t Fight the Uptrend

• The DAX initially pulled back during the trading session on Tuesday as we continue to see the market look a little stretched.
• That being said, I do think you have a situation where we have plenty of buyers underneath that will get involved.
• Looking at this chart, it's easy to see that even though we are stretched this doesn’t necessarily mean that anything bad has to happen, rather that we need to offer a bit of value for traders out there in order to put money into the market. Regardless, the trend has been so brutally positive that it’s impossible to fight it.

There is most certainly an interest in this market, and I think there are multiple support levels underneath that a lot of people will be paying close attention to. For example, the 18,250 euro level is an area that previously had been resistance and should now be support. Underneath there, we have the 50-day EMA that sits right around the 18,000 euro level. The market had recently stretched rather significantly, and therefore, a little bit of sideways action makes quite a bit of sense from what I can see, or perhaps even a bit of a pullback. Either way, it's almost impossible to short the DAX at this point, especially considering that Germany is now exiting a recession. And of course, the ECB is more likely than not to start cutting rates rather soon.

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ECB Cutting Rates Could Propel Market

If that's going to be the case, then we have a scenario where cheap German goods could flood other countries, and that of course is good for the index as there are so many exporters in the DAX. It's a strong uptrend and there's no reason to fight it, so at this point in time, this looks very much the same as it has been for quite a while, with perhaps the exception of the possibility of a pullback in order to bring more traders back into the market. At that point in time, one would have to assume that the momentum will pick back up as well.

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