Dusseldorf Groundbreaking trading days are imminent on the German stock market. They should probably provide an answer to the question: will the ongoing bear market rally turn into a sustainable trend reversal or not?
At the start of the trading week things continue to rise. The leading index closes 0.6 percent up on Monday evening at 13,533 points. With today’s daily high of 13,611 points, the Dax has been extending its upward trend since the end of September. Since then, the stock market barometer has increased by 14 percent, an increase of more than 1,700 points.
Capital market expert Thomas Altmann had initially expected calmer trading days before the opening. “It is very likely that many will not take up new positions in the run-up to the US midterm elections. Therefore, the motto of the hour for many at the beginning of the week should be ‘wait and see’,” he explains.
On Friday, the stock market barometer closed trading with a plus of 2.5 percent or the equivalent of 330 points with a final reading of 13,459 points. The Dax has thus stopped its downward trend since the beginning of the year.
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What speaks for further rising prices is the dynamic of the price gains last Friday. The sales of the 40 Dax stocks had skyrocketed after a rather low volume on the previous days.
Many obviously had to buy into the rising market to avoid missing out on the gains. According to Altmann, at least some of the purchases are currently not made out of conviction. “But the persistently high level of skepticism is a positive factor for the current rally,” he says.
However, investor sentiment confirms that a continuation of the rally will not be easy. Because after evaluating the Handelsblatt survey Dax-Sentiment, Stephan Heibel is certain: “The investment quota of investors is already quite high. Without further positive impetus, no sustained rally is to be expected.”
>> Also read the Dax sentiment: 1700 points up since the end of September – What has to happen for the Dax rally to continue
Conversely, this means that negative reports, for example in terms of inflation or from China, could mean an end to the rally. In the past few weeks, Heibel had always spoken of a surprise potential on the top.
200-day moving average is crucial
In purely formal terms, the Dax would be back in a bull market if it reached 14,234 points. But there is still a long way to go. The 200-day line, which is currently at 13,636 points, is considered to be the decisive variable for further development. With today’s daily high of 13,611 points, there was at least the first approximation.
Dax investors start the week cautiously
If the Dax exceeds this mark on a sustained basis, i.e. at the daily closing price and on the trading day after, the probability of a trend reversal lasting at least several months increases significantly.
This was the case most recently after the end of the corona crash and the weak stock market year 2018, when the Dax then climbed a further 18 percent by the beginning of 2020. “Exceeding the 200-day line could be something like a great liberation,” says Altmann. Incidentally, the European selection index Euro Stoxx 50 reached this line last Friday, but has not yet overcome it.
Furthermore, many analysts are certain: the price increases of the past few weeks are only a bear market rally, i.e. short-term rising prices within a long-term downward trend. Christian Henke from broker IG Markets justifies this opinion with seasonal factors. “We are in a mid-election year. Seasonally, these are not the best stock market years.”
>> Read also: 70 percent minus and more – How investors should deal with loss-makers in the portfolio
In his opinion, things could get a little uncomfortable before the end of the year. “Next year, on the other hand, things are looking much better. 2023 is a pre-election year. And these have been able to convince with significant price increases in the past,” he explains.
Look at the individual values
Metro: Jefferies’ downgrade to underperform from hold is a drag on the stock price. The titles of the wholesale group give way by 2.8 percent.
Ryanair: Europe’s largest low-cost airline has flown a record profit in its first half of the year thanks to a strong recovery in travel demand. While most of its competitors had to cancel massive flights in summer due to a lack of staff in flight operations and are still working below pre-crisis levels, Ryanair was able to fill more seats than before the outbreak of the 2020 pandemic. Ticket prices rose by 14 percent in the summer quarter.
Like all other airlines, Ryanair expects travel demand to remain robust, although high inflation rates are reducing consumer purchasing power. The stock is up nearly 4 percent.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.