Index Shows Signs of Weakness in Germany

There is still a significant chance of upside momentum, but the economic picture does not make that as likely as a pullback would be.

• The DAX German index initially tried to rally during the trading session, but suddenly looks very vulnerable.
• This makes quite a bit of sense considering that the European Union has a lot of concerns right now, not the least of which of course will be the fact that natural gas could be running short.
• As long as Vladimir Putin holds the key to natural gas, it’s a tenuous situation at best.

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When you look at the start, you can see that we ended up forming a bit of a shooting star, and we are hanging about a gap that formed previously, that I have a circle plotted at. Ultimately, I think it makes quite a bit of sense that from a technical analysis standpoint we have seen the market stall here as well. In other words, everything is lining up at the same time to show negativity right where you would expect it. Furthermore, it looks as if the €13,800 level has been important a couple of times, so it all plays together quite nicely.

The global economy is certainly being threatened, and that will have a major influence on what happens with the German economy. After all, Germany is a major exporter to the rest of the world, so it does not operate in a vacuum. If we break down from here and wipe out the bullish candlestick from the Wednesday session, that could be a sign that the market is ready to break down quite drastically. In that scenario, I suspect that the text, right along with other indices around the world, would probably continue to go much lower. On the other hand, if we were to turn around and break above the highs of the last couple of sessions, then it’s possible that we could go to the €14,000 level, maybe even as high as the 200 Day EMA, which is all the way up at the €14,600 level. So having said that, there is still a significant chance of upside momentum, but the economic picture in Germany, as well as the rest of the European Union, does not make that as likely as a pullback would be. It moved below the €13,000 level could open up the floodgates, perhaps sending this market back down to the crucial €12,500 level.

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