• The German DAX Index rallied significantly on Tuesday to break through a short-term resistance barrier.
• The market is closing near the €13,922 level and has cleared the gap that I have marked on the chart.
• Furthermore, we have just wiped out the 61.8% Fibonacci level, so it does look like the DAX may have a bit further to go.
   

Is Germany Headed for a Recession?

The 200-day EMA sits near the €14,500 level, so that might be a target at this point. That is a large, round, psychologically significant figure as well, which is also worth paying attention to as well. Ultimately, the DAX seems to be ignoring the fact that Germany is going to head into a massive recession, but it is also possible that the traders in Germany are looking at the possibility of the ECB becoming as loose as possible. That is a very real possibility due to the fact that the economy is going to get so wrecked that it’s possible that the ECB will of course have to loosen monetary policy, and traders will celebrate the bad news like they do in New York.

Looking at this chart, you can also make an argument that if we were to turn around at this level and break down below the €13,600 level, the DAX could start to sell off again, perhaps looking to reach down to the 50-day EMA. We are still very much in a downtrend, but the move on Tuesday certainly suggests that we have a huge fight on our hands. The market has shown itself to be extraordinarily resilient, so it’s perhaps a situation where we make it a little bit of a pullback, as we are overbought. However, if we break above the top of the candlestick for the trading session on Tuesday, it’s likely that we will continue to see momentum.

It’s likely that if other stock indices in the world start to fall off, the German index will almost certainly fall right along with it. The volume is starting to decline a bit, so you can make that argument as a negative sign as well. We have a lot to look at when it comes to this chart, so keep your position size tight, but it’s likely that we will see buyers.

(Click on image to enlarge)

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