- The German DAX rallied during the trading session on Friday as we continue to see traders jump into stocks around the world as people are trying to “front run” tariff announcements, as people are starting to look at through the prism of the possibility that economic activity returns to normal.
- Furthermore, you have to keep in mind that Germany is exiting a recession, so it does naturally make Germany a little bit more likely to attract trading capital.
That being said, we are getting a bit extended at this point in time, and I would be cautious about jumping in here. This suggests that perhaps we may get a “buy on the dip” market that enough. At this point, I look at the €22,500 level as a major resistance barrier, and to think that we can just simply sliced through it is probably a bit much. However, we had a gap form on the open for Wednesday, which could be filled rather quickly if we start selling off. In that environment, we would test the crucial €21,500 level, an area that might be interesting for technical traders.
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A Game of Relative Performance
As things stand right now, Germany is a place that has been outperforming many other places, especially the United States. Most of this comes down to the idea that the United States might enter a recession, while Germany is exiting one. That being said, there is still a lot of noise about tariffs out there that continue to cause volatile action, and despite the fact that Germany has performed so well, the reality is that it is not immune to that type of random nonsensical trading.
If we were to break above the €22,500 level, then I think we have the DAX going to the upside in testing the previous high level at the €23,500 region. If we were to break down below the €21,000 level, then I think you’ve got a situation where traders may feel the need to drive the text down to the 200 Day EMA, which is near the €20,450 level.
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