DAX Forecast: Continues to Grift

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If energy is going to be an issue in Germany, it’s difficult to imagine a scenario where the DAX does well.

The DAX initially rallied during the trading session on Wednesday but gave back some of the gains. The market has been in a downtrend for a while, although there is a significant amount of noise in this area.
The market continues to be noisy, but this is to be expected in the scenario of a sinking European Union.
After all, the European Union is going to have to worry about energy, and Germany specifically is going to be hit hard as it has such a huge industrial base.

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If energy is going to be an issue in Germany, it’s difficult to imagine a scenario where the DAX does well. The €12,500 level above had been significant support previously, so now it should be significant resistance, which of course was backed up by the pullback just a few sessions ago. At this point, it looks like the market is probably going to continue to drop over the longer-term, which makes quite a bit of sense. Although we have stabilized a bit, that’s what happens in bear markets, you get big moves down, grinding sideways, and then another break.

Volatility and Noise Ahead

When you look at the chart, with just a little bit of imagination you can make a bearish flag out of the last couple of months. The potential measured move could be as low as €10,200, so that would be an interesting move. I think a lot of psychology would be found right around in that area, so I think it’s a situation where you would have a lot of buyers jumping into the market in that area, perhaps even short covering. Regardless, I think the €10,000 level will attract enough attention that it might be a big fight just waiting to happen.

On the upside, if we broke above the 50-Day EMA, then it’s possible that this market could go looking to the €13,500 level, which is right around where the 200-Day EMA currently resides. This not necessarily what I’m expecting to see happen, but it is the possibility that the market would go looking toward in that environment. I believe now, we continue to see plenty of volatility and noise, which typically means lower pricing by the time it is all said and done as stock traders do not like volatility to say the least.