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DAX Forecast: Sits Right at the 50-Day EMA

Germany very well could see energy rationing this winter, and if that’s the case it’s going to absolutely wreck German industry.

The DAX has gone back and forth during the trading session on Thursday as we continue to look for some type of momentum in one direction or the other.Keep in mind that the German index continues to pay close attention to the rest of the world, because so many of the major companies on the DAX are major exporters, and therefore you need to think of it through the prism of how the rest of the world is doing.


Stock markets are crashing again

Germany very well could see energy rationing this winter, and if that’s the case it’s going to absolutely wreck German industry. The 50-Day EMA of course is a technical indicator that a lot of people pay attention to anyway, so it’s not you surprised to see that there has been a little bit of selling. Beyond that, even though there is a very weak euro in the Forex markets, it doesn’t matter if your exports are cheap if there is no real desire to buy them.

Keep in mind that Germany is essentially the engine of Europe, meaning that if the other countries around the European Union suffer, then the German manufacturing sector will as well. Beyond that, we have been in a downtrend for a while, although it’s been very choppy. Stocks overall are not doing well, including in some of the “safer” indices as the S&P 500. Ultimately, I think the DAX will continue to go lower, but if we do break above the EUR13,000 level, then it’s possible that the market could go looking to the 200-Day EMA which is just around the EUR13,500 level.

At this juncture, it looks very much like a market that continues to see a lot of noisy behavior, but downward pressure will eventually get overwhelming. The ECB may have to blink first and loose monetary policy, but quite frankly at this point it’s not even a tightening monetary policy that seems to be weighing upon German stocks, it’s simple reality in the geopolitical, macroeconomic, and liquidity world. As liquidity continues to dry up in the financial system, stocks get hit rather hard, which is something that is being engineered by the Federal Reserve, as the world is desperately searching for dollars. In that environment, risk is not something that a lot of people want to take. Fading rally should continue to be the best way forward.

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