The German index rallied during the day on Friday, reaching towards the €13,000 level. We found enough resistance there to turn around and fall a bit lower. I believe that the €12,750 level underneath continues to be support, and I think that it was previous resistance. I think that this support level should hold in the short term, but even if it doesn’t, I think that there are €12,500 underneath, and then perhaps down to the €12,000 level. The market will continue to be very bullish overall, and I think that we will continue to go towards much higher levels, perhaps reaching towards the €15,000 level.
I think that if we do break down below the €12,750 level, it’s likely that we could unwind to the €12,500 level, so it could provide a short-term selling opportunity. However, the market will probably be easier to trade to the upside, especially if the EUR/USD pair continues to fall as it makes German exports cheap. There are a lot of concerns when it comes to the Italian situation both politically and as far as the bond markets are concerned, so it’s likely that there will be a bit of concern when it comes to European stocks.
Ultimately, this is a market that I think will find buyers sooner rather than later, and as soon as we get this market bouncing, I think that a lot of value hunters will come back into this market place and take advantage of this debt.