Dax Forecast: Continues to Consolidate at Support
- The German DAX has rallied pretty significantly during the trading session on Thursday as we continue to see a lot of noisy consolidation.
- The 18,000 euros level underneath continues to offer a significant amount of support.
- I’m paying very close attention to the 18,250 euros level above because if we can break above there, then the market can really start to pick up momentum.
At this point in time, I would anticipate that you probably see a little bit of FOMO trading and it is more likely than not that other indices around the world would be taking off to the upside simultaneously.
We have seen a pretty significant sell off, but recently we’ve seen a bit of consolidation. So now I’m waiting for that signal to start buying into the DAX because I think it is starting to take off towards the recent highs. That means that we could go to the 18,600 euros level rather quickly, but we also have to keep in mind that a lot of this is going to be influenced by inflationary pressures, but at the same time, the fact that the European Central Bank has cut rates will help Germany as it is a major exporter in the European Union. Pay attention to the euro because if it starts to strengthen too much that could put a little bit of an anchor around the DAX but all things being equal, I believe this is a market that continues to see a lot of value hunters because the DAX is the first place people put money in when they want to invest in the continent.
However, there is a bad scenario that could be realized…
If we were to break down below the 18,000 euro level, then we could start looking to the 17,750 euro level where we had bounced from previously. In general, I do think that the DAX eventually goes looking to the 20,000 euro level, but it may take some time to get there. That might actually be late this year, but nonetheless, it certainly looks like equities continue to just get ran into around the world and Germany won’t be any different.
S&P 500 Forecast: Pressure from Buyers
- The S&P 500 did initially rally during electronic overnight trading on Thursday, but it’s since given back quite a bit of the gains.
- At this point, I think the market is still very much a bullish market, but we may need to pull back in order to find a little bit of value.
- Short-term pullbacks will continue to attract a lot of attention, and I would not expect much of a pullback, maybe 50 points.
Breaking above the 5500 level is of course important from a psychological standpoint, but really at the end of the day, this is yet more of the same action that we’ve seen in this market. I have no interest in shorting the S&P 500 and as long as maybe three or four stocks are doing well, so is the index. This isn’t about the economy. This isn’t about interest rates. Although there is an argument to be said that the Federal Reserve Monetary Policy will have a major influence on where we go. But really at this point in time, it’s about what Nvidia is doing and a few other companies such as Apple, Microsoft, et cetera. So, with that, we now have an ETF of high end technology stocks called the S&P 500.
Look for short-term pullbacks to get involved
Short-term pullbacks continue to be buying opportunities and I think at this point the 5300 level will be the hard floor in the market. The 50-day EMA sits just below there so I think in the worst-case scenario we could drop 200 points but quite frankly there’s not a lot on this chart that suggests we can get anywhere near that either. With this I remain bullish, and I think a lot of traders are going to have to simply hold their nose and buy every time they get an opportunity to get involved. Ultimately, I think the stock market has become more or less a videogame, so you do need to be cautious, but it is still the best way to beat inflation for a lot of people around the world.
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