Dax Forecast: Volatile Amid Central Bank Uncertainty
- The DAX was all over the place during the trading session on Wednesday as stock markets and risk assets all seem to be lost at the moment.
- That makes a certain amount of sense considering that nobody really knows what people can expect from the central banks around the world.
ECB Members Just Can’t Stop Talking
ECB members keep flapping their gums during this trading session, and that’s just making things worse. However, it does look like the 18,000 level has held as a certain amount of support, so that is something worth paying close attention to. If we can continue to see 18,000 hold, then I think you might build some confidence allowing traders to try to push this pair back above the 50 day EMA. If we can take out the 50 day EMA, then I think the DAX market rallies all the way to the 18,600 euros level. If we break down below the 18,000 euros level, that could lead to a little bit of a deeper correction, but I still think there’s plenty of support near 17,750 euros as well.
I have no interest in shorting the DAX, nor do I have any interest in shorting indices in general, despite the fact that the day on Wednesday was a little panic driven, but the reality is this is a market that is going to continue to benefit from number one being the largest economy in Europe, but also benefit from loose monetary policy coming out of the ECB.
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As long as that’s a thing that should continue to propel the DAX higher. I am a buyer of dips going forward in this marketplace, as well as most other international indices. Stock traders just simply aren’t willing to pay attention to the economy and continue to focus on monetary flow. This has been an issue since the great financial crisis, and I think it will continue to be going forward as the economy and the stock market are not the same thing anymore.
S&P 500 Forex Signal: Looking for Higher Levels
Potential signal:
- The S&P 500 is still very bullish, and I think the 5450 level remains supported.
- I’d be a buyer in this general vicinity, with a stop loss near 5430.
- I do think that we will eventually go looking to the 5500 level.
- Even if this trade does not work out, I’ll just be a buyer at lower levels.
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The S&P 500 rallied to kick off the trading session on Wednesday but has since turned back around. Having said that, the market certainly has a lot of support just underneath it and it does make a certain amount of sense that the buyers would come in and try to pick this market up. The 5450 level is an area that people more or less are looking at as a short-term support level. After all, this is a market that has been in an uptrend for quite some time, so you need to be aware of the fact that even if we do fall from here, it’s probably not a major correction in the making.
Volatility
Volatility of course is a feature of the market, but it does look like we are trying to settle down a little bit during the middle of the session, as the open was nothing short of hectic. It’s all about panicking every 15 minutes now, although the S&P 500 seems to be somewhat insulated from this. That being said, a lot of the other markets that I follow were viciously sold off, only to sit still later in the day.
What this tells me is that there is probably somewhat of a lack of liquidity in the market, and that the market is not going to be behaving with any real conviction. That being said, the market is likely to continue to see a lot of volatility, but I think at the end of the day, the reality is that the buyers come in and pick up the S&P 500 every time it pulls back. After all, it’s only a handful of stocks that everybody cares about, and more likely than not, they will continue to focus on what the Federal Reserve is saying and doing rather than the actual economy. After all, we have completely decoupled from the economy when it comes to the stock market over the last 14 years.
CAC40 Forecast: Struggles With the 200 Day EMA
- The Parisian CAC initially tried to rally a bit during the early hours on Wednesday, but as we crossed the 200-Day EMA, we started to see selling pressure again.
- At the €7729 level, it seems as if there is a significant barrier that it’s difficult to break, which of course is backed up by the 200-Day EMA, an indicator that a lot of the longer-term players will pay close attention to.
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Having said that, I do think that it’s probably worth noting that we have bounced quite a bit from the lows of the day, and it does suggest that there are these people out there willing to step in and pick up cheap French equities. Ultimately, a lot of what we have seen recently is an overreaction to the idea that there is going to be a snap elections in France, and what that could mean going forward. Regardless, cooler heads will prevail, and I do believe that value hunters out there are looking at French equities with great interest.
Technical Analysis
The technical analysis of course is slightly negative as far as moving averages are concerned, but truthfully, I find moving averages may be a tertiary indicator at best. After all, if it were that easy to trade, professional traders would just simply use moving averages, and everybody would be rich! Obviously, that’s not the case so I think a lot of people are looking at the idea of whether or not the French economy is going to struggle, or if it is going to pick up.
Furthermore, you also need to pay attention to the euro, because if it continues to weaken, that could help the idea of French equities picking up, due to the fact that so many luxury brands are represented by the CAC 40 that the idea of foreigners buying French luxury goods could be a big driver as well.
On a break above the €7700 level, I think this is a market that will go directly to the €7900 level, currently the home of the 50-Day EMA, and of course an area that we had previously seen support at, so there should be a certain amount of “market memory” offering resistance at.
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