The DAX has been somewhat quiet on Friday as we head into an uncertain weekend again.
DAX
The DAX has been somewhat quiet on Friday, and this is just a continuation of what we've seen all week. A little bit of a probe to the upside, a little bit of a probe to the downside, and we continue to hang around 26,400 euros.
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On Friday, that's not such a huge surprise because we do have to worry about any gaps that would kick off the week on Monday. And of course, there will be high potential for that to happen as traders look at the situation in the Middle East.
Keep in mind Germany is particularly vulnerable as most of its energy comes from Qatar now. Remember, the Nord Stream pipeline has been blown up, and of course the whole complexity of buying energy from the Russians was never going to last while supplying the Ukrainians with material needs in a war.
With all of that being said, Germany now is somewhat at the mercy of its energy supply because of its industrial base. The input for energy could be higher this winter, or it could be extremely high if they have to start importing liquefied natural gas from the United States. There's a huge cost involved in doing that. That's the bearish case.
Energy Vulnerabilities and Consolidation Outlook
The bullish case of course is that maybe things settle down, the German economy and by extension the European economy is starting to show signs of life, more risk on is out there, and it is generally accepted that some of the central banks around the world may not be as tight as once thought.
Looking at this chart, the easiest way to simplify it is you recognize that we shot higher and then now we're just going sideways. Generally speaking, that's consolidation that leads to continuation.
But anything could happen. The 26,000 euro level underneath seems to be a support level as it was previous resistance and it's a large round psychologically significant figure. So as long as we can stay above there, I assume dips get bought into.
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