This Tuesday’s consolidation should not come as a surprise to any investor. After all, the Dax has risen by more than 1300 points since May 9th – an increase of almost ten percent. Such pauses for breath are common and healthy for further price development.
And the way this rally is going gives hope for even higher prices than the previous high of 14,709 points set on Whit Monday. Because the survey data from the Handelsblatt survey Dax-Sentiment show that many investors were surprised by the beginning of this upward movement and initially looked at the rising prices with doubts in May. Only now are they stepping in.
But for the sentiment expert Stephan Heibel, after evaluating the current survey from last weekend, one thing is certain: “We are still a long way from sentiment values that would weigh on a continuation of the rally.”
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But how far can this rally go? According to technical analysis, the range of 14,800 to 15,000 points should be decisive for the medium to long-term performance of the Dax.
Because with sustainable courses over 15,000 points, the leading German index would have jumped a bunch of important hurdles. It would be a surprise if the Dax managed to do that in the coming trading days.
New bull market phase
On the one hand, the Dax would re-enter the bull market with quotations above the psychologically important mark, which promises a longer lasting upward phase. According to the definition, price gains with a low point of around 20 percent are necessary. Calculating from the annual low of 12,438 points, the bull market would easily have been reached with prices above 15,000 points.
Long term trend line
At around 15,070 points, the 200-day line is currently in this area, which is mainly observed by long-term investors. If the Dax manages to sustainably overcome this line, that would be a first entry signal for this group of investors.
Medium-term resistance
The area between 14,800 and 15,000 points was the crucial support zone in the past year. For around nine months, investors were always willing to invest there.
The subsequent price losses were correspondingly large when the leading German index gave up this mark in February in the wake of the Russian invasion of Ukraine. This made the area an important resistance.
After an interim fall to 12,438 points, the German stock market barometer stabilized at 13,500 points. There is now the current support zone, which must hold so that 2022 does not turn out to be a catastrophic stock market year.
Lira decline continues again
Turkish President Recep Tayyip Erdogan announces further interest rate cuts by the central bank despite inflation exceeding 70 percent. “This government will not raise interest rates. On the contrary, we will lower them further,” Erdogan said in a speech on Monday. The Turkish lira then fell 1.1 percent to $16.75, its lowest level since December.
At the end of last year, the greenback reached a new record high of 18.12 lira, whereupon Erdogan used unconventional means. With an exchange rate-hedged deposit system, savers were temporarily prevented from investing their assets in euros or dollars for fear of a currency collapse.
But now, according to the Commerzbank currency analysts, “the next big set of dollars/lira is in the pipeline”. For expert Tatha Ghose, “the crux is that Turkey’s inflation (expectations are now fully detached) will dig deep into these high levels because the central bank is operating without inflation targeting”.
Individual values in focus
Mercedes-Benz: The stock fell 0.7 percent. According to the Federal Motor Transport Authority, the company is recalling almost a million older vehicles worldwide because of possible brake problems. Accordingly, ML, GL and R-Class cars built between 2004 and 2015 are affected, as the authority reports in its recall database. Germany probably accounts for almost 70,000 cars.
Deutsche Bank: Deutsche Bank has had several hundred of its Russian IT experts relocate to Berlin. Insiders told the Handelsblatt that a mid-three-digit number of the approximately 1,500 programmers at the Russian technology center had come to Germany. The stock fell 1.2 percent.
Adidas: The 1.2 percent lower Adidas shares, which have to say goodbye to the significant price losses in recent months from the Stoxx Europe 50, ranked in the lower middle of the Dax. The raw materials and mining group Glencore, whose shares have so far shown a strong price development this year, will soon take the place in the pan-European leading index.
SGL: The papers in the SDax shot up to 13.3 percent up to January levels. Thanks to good business development, the carbon fiber specialist has raised its targets for this year. Business is developing well and the increased costs for raw materials, energy and logistics can be passed on to customers, is the reason given.
More: Dax Weekly Outlook – All eyes are on Christine Lagarde.