DAX Breakout on Tuesday: The Bear Trap Snaps Shut!
After a grueling streak of five "red" trading days (closing price lower than opening price), the DAX pulled a rabbit out of the hat on Tuesday, delivering an impressive turnaround. The script was almost textbook: with a quick "dip" below the previous day's low, the index hunted for bearish liquidity before completely steamrolling short-sellers with a massive wave of buying. Ultimately, the leading index closed at 24,998.40 points, landing precisely on the doorstep of the psychological barrier. A sustainable breakout above the 25,000 mark could very well happen as early as today, Wednesday.
Pessimism vs. Hope: Why the ZEW Index Was Ignored
Interestingly, market participants gave the cold shoulder to harsh reality. The ZEW Index figures were disappointing across the board: instead of the hoped-for brightening to 65.8 points, the sentiment indicator delivered a meager 58.3. This clearly shows that pessimism still runs deep and the economic trough in Germany continues to linger.
However, as the saying goes, the stock market trades the future, not the present. Investors are betting that the bottom will be reached in the coming months, which explains the current gap between rising stock prices and a stagnating real economy. Support came, as statistically expected, from Wall Street. Following the holiday, US markets started somewhat shaky but managed to finish slightly in the green, providing the necessary tailwind for Europe.
Wednesday Showdown: Will the 25,240 Resistance Fall?
The direction for today, Wednesday, is clear: if the DAX manages to carry Tuesday's momentum forward, we will see another run at the 25,240 level. We remember this well: it was the exact price point where the DAX failed so dramatically last Thursday, surrendering all of its intraday gains. If the index manages to clear this massive resistance on a daily closing basis this time, the path would be open for a direct run toward its all-time high.
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