At this point, I think you need to pay close attention to momentum and other indices as they all tend to move in the same direction over the longer term.

The German DAX index pulled back a bit Tuesday after initially trying to rally. The Tuesday session in the DAX has initially tried to break above the 50-day EMA but struggled to continue. At this point, the market is likely to continue to see a lot of back-and-forth action, but as we are at the top of the bearish channel, it’s likely that we would see sellers continue to cause issues.

It’s worth noting that the €14,000 level has offered a bit of support, and if we can break down below there, it’s likely that we would go looking to the €13,750 level next, possibly even the €13,000 level over the longer term. Keep in mind that the DAX is highly sensitive to the overall outlook for the European Union, and it is worth noting that something is less than rosy at this point. The ECB is talking about tightening, so it does make sense that we will see equities on the continent suffer.

If we break down below the bottom of the candlestick for the trading session on Tuesday, it’s likely that we will see a move to the downside. On the other hand, if we were to break above the €14,250 level, then it’s possible that the DAX may recover, perhaps reaching toward the 200-day EMA which is at the €14,750 level. Regardless, I think the one thing you can probably count on is a lot of volatility, so you need to be cautious with your position size. I think we are going to continue to have to pay close attention to statements coming out of the ECB, because if they start to sound more and more hawkish, then that will put more downward pressure on the DAX.

At this point, I think you need to pay close attention to momentum and other indices as they all tend to move in the same direction over the longer term. If other indices around the world start to fall, that will drag the DAX right along with it. The market has been grinding lower since the beginning of April, and it’s possible that we will continue to see a lot of this through the summer as the world tries to figure out supply chain issues, and of course inflation.

The only thing you can do at this point is to keep your position size relatively small, and only add to your position when you get confirmation of your trade.

The gold markets fell a bit on Tuesday to dip below the 200-Day EMA. By doing so, it suggested that we could break down. However, we have turned right back around to show signs of life and support.

Doing so suggests that the market might be getting ready to bounce, but there is a lot of work to go. The gold markets were beaten rather hard by the US dollar, and I think this could very well continue to be an issue. That being said, the gold market is a little oversold and we are sitting in an area that previously had been resistance, which you would suspect to be potential support. With this, I think the market will continue to be very noisy, but it certainly looks as if a short-term bounce could be coming. Keep in mind also that the FOMC meeting is going on, meaning that there should be an interest rate decision, monetary policy statement, and then a press conference coming from the Federal Reserve. This will have a massive influence on the US dollar.

If we were to break down below the lows of the trading session on Tuesday, that could open up a move down to the $1800 level. The $1800 level is a large, round, psychologically significant figure, and is also an area where we have seen quite a bit of buying in the past. If that were to be broken through to the downside, it is very likely the gold will collapse at that point.

On the other hand, if we were to turn around and take out the 50-day EMA on a daily close, the market likely will go much higher. I don’t think that we will necessarily do that, but I do think that a short-term bounce does make sense. If we did take out the 50-day EMA, that would probably bring in quite a bit of momentum buying as well, so I think it is only a matter of time before we continue to see massive volatility. The only thing you can do at this point is to keep your position size relatively small, and only add to your position when you get confirmation of your trade.