After leading the global markets higher out of last October’s swoon, the German DAX has caught a cold. From it’s intraday top on April 10 (12390) to bottom on Tuesday (10864), the DAX fell 12.3%. Now many analysts are wondering if the DAX will take the markets lower? Or on the flip side, could a bounce push U.S. equities and the S&P 500 to new highs?
One tailwind for the German DAX was European Central Bank’s added stimulus in 2015 (or perhaps just the perception of it). This took the Euro down near par (a low 1.0458). But the Euro rallied back up over 1.14 in May. This, coupled with the Greek debt tragedy, has put pressure on European stocks – namely the Euro Zone’s big stock market index, the German DAX.
To better understand what may come, let’s look at a chart and analyze the recent pullback. As you can see below, the DAX correction took it down to within 40 points of the .382 Fibonacci retracement of its big rally. This level will be key over the weeks ahead. Should this level falter, the index could slip as far as the .618 Fibonacci retracement and lateral support just under 10,000.
German DAX Market Chart – Key Fibonacci Levels In Play
The price action over the coming days/weeks should be telling. The DAX will either carve out a bottom at the .382 Fib or put in a failed rally (backtest of broken trend) and continue lower. Good luck trading and have a great weekend.
Twitter:Â @andrewnyquist
The author does not have a position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
