The German index has rallied significantly during the trading session on Friday, but gave back about half the gains as the 26,400 euro level has offered a bit of a barrier.
DAX
The German index has rallied significantly during the trading session on Friday, but gave back about half the gains as the 26,400 euro level has offered a bit of a barrier. Ultimately, if we can break above that level, then the DAX could really start to take off, but it looks like we need to consolidate a bit heading into the weekend.
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That does make a certain amount of sense considering there's so much nonsense going on around the Persian Gulf. We don't know what the next statement will be and what that will do to the outlook for energy for the European Union. Quite frankly, the only thing that seems to be certain at the moment is uncertainty, and as long as that's going to be the case, it's worth noting that although the DAX is very bullish, it is a market that is going to be held hostage by the idea of whether or not European energy is going to be abundant this winter.
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Any pullback at this point in time, barring some type of energy disruption, I suspect will be attractive to buyers as people will chase momentum. When you look at the chart, it doesn't take a lot of imagination to see that perhaps we're at the top of a channel, but I think you also need to be aware of the fact that like any other market, it can become impulsive.
A pullback should offer value and, of course, a great way to play the European Union's industrial base, as Germany is the center of that. But then again, that's what makes it vulnerable to energy shocks. The German government is looking to throw a ton of money into infrastructure spending, so if they have energy, the German index probably ends up being one of your better performers. It's the first place I look to when looking at Europe.
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