The DAX has gone back and forth during the trading session on Monday to show real confusion. This is not much of a surprise though, because there is a shooting war on the steps of Europe itself. The DAX is the first place money goes flowing towards when traders are looking to get involved in the European Union, so it does make a certain amount of sense that we would see the DAX go back and forth with the headlines.
All of that being said, we have broken through the bottom of a major support level near the €15,000 level, and have since seen a lot of volatility. The more volatility that we see, the more likely we are to fall as investors do not like uncertainty. The Russians and the Ukrainians did meet on the Belarusian border during the session and have also suggested that perhaps there will be further talks, so there is a little bit of hope for peace, especially as it appears that the Russian offensive has not been as successful as assumed. If we do get some type of resolution, the DAX will likely be one of the initial beneficiaries.
Having said that, you need to keep in mind that the DAX is also just now kicking off the so-called “death cross” when the 50 day EMA breaks down below the 200 day EMA. Furthermore, there are a lot of concerns about Europe slipping into recession, and therefore it is difficult to imagine that stock markets will suddenly take off. The rate of change when it comes to economic indicators seems to be going in the wrong direction, and as markets are forward-looking, they will start to look in that same direction.
The European Central Bank will more likely than not be forced to do something to accommodate the economy, but until they do so, indices like the DAX will continue to sell off. The candlestick for the day shows just how confused traders are, so I think at this point it is more or less going to be a “sell the rallies” type of situation on signs of exhaustion. The €14,000 level is the current support level, so breaking down below there on a daily close could have the market dumping even further, as it would be a severe breach of support.
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