- The DAX rallied on Monday, breaking above the 50-day EMA, signaling possible bullish momentum.
- I expect support near €24,000 and €23,050, with potential upside toward €25,000 if risk appetite continues to strengthen.
The German index rallied a bit during the trading session here on Monday to break above the 50-day EMA, an indicator that people will be watching very closely as it is one that many view through the prism of a trend-following device. The market will likely remain sideways due to the 50-day EMA. But if this market were to rally from here, the €24,500 level is an area that I think a lot of people will be watching.
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Short-term pullbacks, I think, offer plenty of support near the €24,000 level and then again at the €23,050 level, as the 200-day EMA sits right there and has, in fact, been a significant floor in the sideways consolidation range that we have been in back in May and up to this point. Ultimately, I think the market breaking above the high set in the middle of October allows this market to go much higher—perhaps to the €25,000 level and possibly even higher than that.
All things being equal, this is a market that will move right along the lines of risk appetite and, of course, is the first place where people go jumping in when they want to put money into the European Union. As Germany goes, so goes the rest of the EU. That being said, if you are not trading the DAX but maybe trading one of the other indices in the European Union, such as the Paris index, the Milan index, or Amsterdam, this could be what you use as a leading indicator. Nonetheless, I do like the idea of buying pullbacks in this market, as it has proven itself to be somewhat resilient, but it’s more or less in an accumulation pattern, I believe.
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