DAX Forecast: Gives Up Initial Gains on Monday

• The DAX initially rallied during the trading session on Monday, but then melted down after the PMI miss in the United States has everybody banking on the idea that the economy is going to collapse, and we will all be dead in a week.
• Obviously, this is hyperbole, but at the end of the day, that’s essentially how the market is behaving.
• With that being in mind, I think that those who are going to be a bit patient will probably be rewarded for that patience.

DAX Will Lead the Way

The DAX will lead the way for the rest of the European indices, and I think you should continue to look at the DAX as the “bellwether index” for the European Union. After all, Germany is by far the biggest economic engine on the continent, and I think a lot of people will look at it through that prism. With this, I like the idea of buying the DAX on these dips, because I do think that it is probably only a matter of time before people start focusing on the idea of Germany and the rest of the European Union exiting a recession.

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You should also keep in mind that war is an excellent profitable opportunity. While it is callous to say this, the reality is that the European Union will continue to get a bit of an economic boost from the war in Ukraine, as it helps with the military industrial complex, and of course a lot of exports. Governments are spending massive amounts of money on armament orders, and of course the idea that the economy is going to continue to benefit from government spending overall, and therefore I think you will continue to see a lot of inflation of asset prices. After all, that’s the only game the central bank is not a play, and therefore one would assume they will continue to go back to that playbook.

Underneath, if we were to break down below the €18,250 level, I think at that point in time you will have a lot of people looking for support, right along with the €18,000 level underneath that. In other words, this remains a “buy on the dips” market.

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