#DAX Forecast - DAX Pulls Back to Crucial 50 Day EMA (18 Jan 2024)

Potential signal: I am a buyer of DAX in general. If we can turn around and recapture the €16,500 level, I believe that momentum will reenter the market, and we will continue to build the Polish flag that could be part of the market. I would have to stop loss order just below the 50-Day EMA and would be aiming for €17,000.

• The DAX fell rather hard to kick off the trading session on Wednesday, reaching down toward the crucial 50-Day EMA.
• That being said, the 50-Day EMA does make a certain amount of sense as support, because not only it is a technical indicator that a lot of people follow, but we also happened to be near a swing high.

Stock indices around the world are a little overbought, so this pullback certainly helps the idea of trying to find value. While I don’t necessarily suggest that we should be jumping directly into the DAX right now and buying with both fists, the reality is that the market is very much in able market, and therefore you need to look for opportunities to pick up a bit of value in what has been an explosive move to the upside.

ECB and the Euro

Pay close attention to statements coming out of ECB governors, because we have seen a bit of misdirection when it comes to directionality overall. There has been a lot of noisy behavior, as some members of the ECB have suggested that rates could slip, while others are suggesting that the rates need to stay tight for longer. All things being equal, this is a market that I think is going to continue to look for some type of stability coming out of the native currency.

If we do break down below the 50-Day EMA, then it is likely that the market could go down to the €16,000 level. The €16,000 level of course is an area that is a large, round, psychologically significant figure, and an area where we have seen some consolidation previously. The 200-Day EMA could be reaching that area rather quickly, and therefore I think you’ve got a situation where the technical analysis lines up in that general vicinity, perhaps making it a perfect area to start buying, assuming we even get there. In the meantime, there’s also the possibility that we simply turn around, and if we do that it opens up the possibility of buying as well.

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