Dax closes above the 14,500 point mark – professional short sellers are under pressure

Dusseldorf With a price jump, the leading German index has passed the 14,500 point mark and closes 0.8 percent up at 14,540 points. The autumn rally thus continued. Since the end of September, the Dax has climbed 2,700 points, an increase of more than 22 percent. The new history high is 14,570 points.

The minutes of the last meeting of the US Federal Reserve, which were published on Wednesday after the close of trading in Germany, met the high expectations of stock market traders. Everything points to a slower pace of interest rates from the next December meeting, with interest rate hikes at least in the US coming to an end in six months. Good news for both the stock and bond markets.

Trading turnover at the 40 Dax companies was below average on the first three trading days of this week. Around 50 million pieces changed hands every day, a value between 60 and 70 million papers is usual. This will certainly not change on today’s US Thanksgiving holiday because the stock exchanges on the other side of the Atlantic will remain closed.

In line with the low turnover, the fluctuations over the course of the week so far have also been extremely small. The trading range this week was just 1 percent. It ended at 14,485 points on the top and 14,321 points on the bottom.

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But for the stock exchange expert Thomas Altmann from the investment house QC Partners, “the past has shown that fluctuations can increase, especially on days with low sales”. He said that before the start of trading. Because then just a few purchases or sales are enough to move the market in the long term. The past three trading days have been the “calm before the storm”.

For the technical analyst Jörg Scherer from HSBC Germany, such a “stable lateral position was often the ideal breeding ground for the next trend impulse”. He writes that before trading begins.

On the downside, this could be discharged if the daily low of 14,344 points on Tuesday is undershot. A slide below the low of November 17th at 14,150 points should even lead to a significant expansion of the current breathing space. To the north, the early June high at 14,709 points defines next resistance.

Majority of professionals are pessimistic

It was to be expected that the Dax would break out of this one percent trading range for the current week. Because the evaluation of the current survey of the Frankfurt Stock Exchange among medium-term private investors outlines two scenarios for the coming trading days. Both offer good support to the leading German index. Because despite the small trading range of the past few days, the vast majority of pessimists among investment professionals who are betting on falling prices have not narrowed.

Only a few neutral investors have bought in the past few days despite the modest pullback. There is some evidence that a certain fear is spreading among these investors that their own performance will lag behind a possible year-end rally.

Two possible Dax scenarios

In the first scenario of the behavioral economist Joachim Goldberg, who evaluates the survey, a larger number of pessimists are likely to close their short positions in the range between 13,900 and 13,950 points when prices fall.

Compared to the previous week, this mark has increased by 200 points and is an indication that more and more short sellers are abandoning the idea of ​​still making high profits with their put products.

Selling put products is a pillar for the market. Because short sellers first borrow shares and sell them immediately in the hope of being able to buy them back at a lower price before the return date. The difference between the sale and buyback price is the profit that these professionals can only dream of at the moment.

In the second scenario, as prices rise, these bears come under pressure to sell their short positions to keep those losses from escalating. In Goldberg’s opinion, this should “ultimately ensure at least a small short squeeze with appropriate capitulation purchases”. A short squeeze is the name given to brilliant price increases, which are usually not accompanied by correspondingly positive news.

Look at the individual values

Encavis: As part of its partnership with the Norwegian solar park developer Solgrid, the company is taking over another solar park in Sweden. The share gained 3.3 percent.

Bechtle: The IT service provider is expanding its business in Great Britain with the takeover of the system house ACS. ACS customers, with whom Bechtle has worked in the past, include regional companies, corporations and public institutions. ACS was established in 1995 and employs 93 people in Northampton. Bechtle did not provide any information on the purchase price. The share price benefited from the purchase and rose by 0.7 percent.

Remy Cointreau: The French spirits group performed better-than-expected thanks to strong demand in China and the US and tightened cost controls. However, the Executive Board expects the high demand to normalize over the course of the year. The stock fell 0.3 percent.

LEG Real Estate: The papers rose by 6.8 percent. Morgan Stanley analysts upgraded the stock’s rating to “Overweight” from “Equal-Weight.”

Unipers: The papers of the tumbling gas giant went down 12.8 percent. In addition to the already known rescue plans, authorized capital of up to 25 billion euros is to be created by issuing new shares, which will be subscribed exclusively by the federal government.

Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.

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