• The DAX was very quiet during the last couple of weeks, and of course, Monday will be no different. Ultimately, the DAX is hanging around in a rectangle, sitting on top of the 50-Day EMA, and of course the 200-Day EMA.
• Ultimately, this area should continue to be supported, but if we were to break down below the 200-Day EMA, colored and blue on the chart, then the market is likely to continue to drop from there.
• In that general area, I would anticipate that the market could drop down to the 13,200 level.

On the other hand, if we were to break above the 14,100 level, then it’s possible that we could go looking to the 14,500 level above. That’s an area that previously had been resistant, and therefore I think a little bit of “market memory” should come into the picture at that point. Overall, this is a scenario where the traders will be looking at this through the prism of whether it is a “risk on” or a “risk off” type of situation.
 

Market Must Make a Bigger Decision

It’s worth noting that the market has been extraordinarily tight over the last couple of weeks, but as volume starts to pick up, then it’s possible that we could get a little bit bigger of a move. The market will be very choppy between now and the end of the week, but once we get into next week, I anticipated that more volume will be available, and therefore the market will have a little bit more in the way of clarity.

The German economy is highly sensitive to the global economy, which looks a bit threatened at the time. The major companies in Germany are all major exporters, so you also have to take into account the Euro and its exchange rate when it comes to other currencies around the world. If the Euro falls, a lot of times it will help the idea of exports coming out of Germany and therefore it should help the stock market. Ultimately, the market must make a bigger decision, so once we break out of the consolidation rectangle, then we should see momentum come into the market and really start to push things in one direction or the other. The DAX is also considered to be the “blue-chip index” of the European Union, so it’ll be the first-place money comes into the EU, as well as the first place it leaves from.

(Click on image to enlarge)

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