- During my daily analysis of global indices, the German DAX has captured my attention as it has fired off a fairly strong signal via technical analysis.
- Early on Friday, the German index had plummeted below the €20,000 level, reaching toward the crucial 50 Day EMA.
- However, we have since seen risk appetite come back into the marketplace, or perhaps we have just seen people stop shorting the market heading into the holidays. Either way, the result is the same, price rises.
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Technical Analysis
The technical analysis for the DAX is rather positive, despite the fact that the last couple of days have been rather brutal. The 50 Day EMA holding as support of course is a very bullish sign, but it’s also worth noting that we have recapture the €20,000 level on significant volume. Furthermore, the euro has recovered a little bit, and while a weak euro helps exports, a euro that is on fire certainly doesn’t do anything to convince people to invest in the region.
Ultimately, we have the holiday coming up on Wednesday, and then again, we have New Year’s Day the next week, so I think volume might be a little bit of an issue here. Nonetheless, I think we will continue to see buyers on dips, just as we saw during the Friday session. Quite frankly, things had gotten a little out ahead, and therefore I think value hunters finally stepped in and picked up cheap contracts.
This is true not only in Germany, but also the United States which is seeing the NASDAQ and other indices absolutely rip to the upside. Because of this, think it’s probably a scenario where traders will be looking at this through the prism of trying to find value every time it drops, because with the European Central Bank is likely to ease rates, it should stimulate economic activity which of course will have Germany more than any of the other countries in the European Union as it is the main economic engine of that area.
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