German index rolls over to start the week

The German index pulled back a little bit during the trading session on Monday, reaching down just below the €12,400 level. There is a lot of noise underneath, extending down to at least the €12,250 level. That is an area that should be massive support, based upon the action that we have seen over the last several days. Beyond that, I anticipate that the €12,000 level should be supportive, just as the uptrend line underneath will be. In other words, this is a very difficult market to envision breaking down, at least not until we clear the various support levels. I believe that the market should continue to be choppy, but when we pull back like this there should be buying opportunities.

I think you should probably be a bit cautious about building up the position, and therefore I would use small positions initially. I think that when we pull back like this, it should give us an opportunity to take advantage of value as the market participants have clearly decided that the uptrend line underneath should be very supportive. If we were to break down below the €11,800 level, the market would almost certainly unwind from here, perhaps reaching down to the €11,500 level, perhaps even the €11,000 level after that. Having said that, I believe it’s very unlikely and I think that it is more likely that we go much higher, and that we may have pulled back to resume the longer-term uptrend.

DAX Video 16.04.18