Given enough time, the market will probably continue to look at this as a market that has plenty of negativity in it, and I think that will continue to be the main driver.

The DAX initially gapped lower during the Monday open but turned around miraculously to wipe all of that out and end of the day in the green. In fact, it ended positive at about 4/10 of a percent, which is a rather unremarkable figure, and you take a look at the chart and see how much gain it took to get to that point.

At this point, I still think that the DAX is probably going to find some pretty significant selling pressure above, but it looks as if there might’ve been a little bit of value hunting during the day. Signs of exhaustion after rallying will be an excellent opportunity to get short again from what I can see, as the EU is in serious trouble and the German economy is not going to be spared. After all, modern economies demand a lot of energy, not necessarily something that we are going to see in Europe.

ECB’s Policy Favors Bears

• The ECB claims that it’s going to be raising interest rates, which is interesting considering that the EU economy is so fragile now.
•  Inflation is out of control, so they may not have any other option but to try to tighten in this environment. Because of this, it’s difficult to imagine a scenario where the market can simply take off.
• The DAX should open a nice selling opportunity above, perhaps near the 13,200 level.

The candlestick on Friday was rather brutal, and that does suggest that there will be a bit of follow-through. Given enough time, the market will probably continue to look at this as a market that has plenty of negativity in it, and I think that will continue to be the main driver. If inflation continues to be an issue, stocks need to come down, not only in Germany but worldwide in general. The market will almost certainly try to get back down to the 12,500 level, where we had bounced from previously. If we break it down below there, then we could see a major continuation of negativity. All things being equal, I think if you are patient enough to look for selling opportunities, you should do quite well in this environment. If we wipe out the Friday candlestick and take out the top, then I might be convinced we can go further to the upside.

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Gold markets have rallied during the trading session on Wednesday to reach higher and fill the gap from the open on Tuesday. The market looks very likely to pull back in the short term, as it typically means that you will find a bit of resistance. Now that the gap has been filled, we can start to speculate on the overall attitude of the market.

The 50 Day EMA has offered support, even as we pierced it during the trading session on Tuesday. Now that we have seen quite a bit of bullish pressure during Wednesday, it does suggest that we are going to make an attempt to break out to the upside. If we can break above the $1970 level, that would be a very bullish sign and could open up the possibility of a move towards the $2000 level, possibly even the $2050 level.

You can see that the market has been very noisy as of late, and it does suggest that perhaps the volatility will continue to make things difficult. That being said, I think this is a market that has a lot more going for it than against it, especially as there are so many moving pieces in the global economy right now that people will be paying close attention to. The interest rate markets have been very volatile as of late also so that obviously has a lot to say about what happens with gold.

If we were to break down below the short-term “double bottom” that we had made, that opens up a move down to the $1850 level, an area that previously had been significant resistance. In that scenario, I suspect that there would be a lot of potential value hunting in that area, but we would have to wait for the proper price action to proceed.

I do believe that you should pay attention to the US dollar, but it is not the only driver of where we go next. There are a lot of concerns when it comes to the war in Ukraine, and therefore gold could be thrown around as a result also. The size of the candlestick for the day on Wednesday has been somewhat positive, but what has been truly impressive has been the hammer that had formed during the Tuesday session.