The German market rallied a bit during the trading session on Tuesday, reaching towards the €12,900 level, before pulling back slightly. I think that the market forming the obvious “W pattern” on the hourly chart suggests that we are going to continue to go higher, perhaps reaching towards the €13,000 level, and then beyond that. I think that short-term pullbacks are buying opportunities, and I think that given enough time we will probably continue to go much higher. I think €15,000 is still a reasonable target, but we need to see cheap money and the European Union continue, and more importantly: the Italian situation get settled. If it does, then I think the DAX will be free to go much higher.
If we break down below the €12,500 level, that would negate the W pattern, and could send this market down to the €12,000 level. Although that certainly could happen, I think that it is very likely that it will be very difficult to happen. Overall, I do believe that value hunters will continue to jump into this market, so keep that in mind and look at short-term pullbacks as potential value until of course we break down below the €12,500 level. I like the idea of using small positions to get involved, and then adding to them once we make a fresh, new high on the hourly chart. In general, I am positive but I’m also realistic.