The leading German index is in a downward trend this year.
(Photo: Bloomberg Creative/Getty Images [M])
Dusseldorf The third attempt to end the downward trend since the beginning of January is underway on the German stock market. In the first hour of trading, the Dax initially climbed back above the psychologically important mark of 14,000 points and is listed at 14,030 points, an increase of 0.7 percent. The leading index ended yesterday’s trading day 1.1 percent lower at 13,939 points.
With today’s price gains, the leading German index is reacting to the trend reversal on the US stock exchanges yesterday, Monday. Interestingly, the US stock exchanges rose after significant losses in the meantime, when ten-year US bonds returned more than three percent for the first time since December 2018. In fact, rising interest rates are considered a burden on stocks. But the Nasdaq 100 technology index was little changed when bonds hit the 3 percent mark, and then rose 1.7 percent.
According to the technical analysis, the situation with the leading German index is now getting exciting. Accordingly, Jörg Scherer from HSBC Germany says: “The situation is coming to a head”.
On the way up, the leading German index faces crucial hurdles. On the one hand there is the 50-day average line, which sets the medium-term trend and is listed at 14,152 points. The downward trend line since the high for the year on January 5 is already slightly above this. This line has now fallen to 14,262 points.
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Since then, the Frankfurt benchmark has twice attempted to sustainably overcome this line and failed twice. A sustained break in this line would be the first important signal that the stock market would calm down again with a good chance of dynamic price increases.
“So the current investment motto is ‘make or break’,” says Scherer. “Investors should be rewarded for their patience with a dynamic movement impulse in the event of an outbreak.”
Investors are only slightly invested
There are many reasons why it could dynamically continue higher after a successful breakout of the downtrend. On the one hand, there is the extremely pessimistic mood among private investors in this country and on the other side of the Atlantic. In such a situation, the majority of investors are not invested. Another sell-off seems unlikely because only a few can still sell.
That could also have been the reason why the US stock markets rebounded yesterday Monday, even though the yield on ten-year government bonds rose to three percent. This value is currently 2.9866 percent.
A look at the derivatives market also shows that both private investors and professionals are starting to hedge against falling prices again. At the Stuttgart Euwax, private investors have again started to buy more put certificates, which increase in value when prices fall.
The picture is similar on the Frankfurt futures exchange Eurex. The put-call ratio has risen slightly again and is above the average of the past few months.
Conversely, this means that if the Dax rises above the important chart technical marks, many investors are wrongly positioned and have to chase these price gains and inspire the rally.
Dax shares are fundamentally cheap
The fundamental situation is also positive. According to Thomas Altmann from the investment house QC Partners, the Dax shares are currently trading at 14 times the profit. “In the past five years, the average price/earnings ratio was 23,” says the capital market expert.
Should the Dax overcome the downward trend, 14,603 points will be the highest level in the past stock market month of April as the next benchmark. This is followed by the area around 15,000 points, which is probably the most important medium-term resistance on the way to a successful stock market year in 2022.
Look at the individual values
Price capers on Europe’s stock exchanges
Covestro: Rising costs and the ongoing corona lockdown in China are thwarting the plastics manufacturer’s plans for the year. The stock fell 4.8 percent.
German postal service: The parcel boom seems to be over for Deutsche Post. Nevertheless, the group is growing faster than expected. Because the freight business is becoming more lucrative, which gives the paper a plus of 0.9 percent.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.