How far does the Dax fall because of the coronavirus crisis? It will still take some time for the spoiled bulls to get used to this new market situation. Thinking back to the last few months, there was only one direction to go. Every little weakness in the bottom was immediately taken advantage of to buy. In 2019 the DAX rose by 26%. And many expected to be rich again in 2020. This golden market development of the Dax and the MDAX should now be history for quite some time. The question that is currently clearly above the heads of traders is: what will happen next and when will the first counter-reaction come?
Dax: Selling pressure may still increase
Usually a trader’s first glance is directed at the chart. The market and chart technique is a great help in forecasting future developments. In such a special situation, however, these aspects are absolutely pushed into the background. With the DAX, we are now no longer in a purely technical market, but in a fundamental one. Now other questions arise. When will the first schools be closed? When will people stop going to work? And when will they no longer take the train?
The picture can be painted gloomily. If we assume a further spread, the price correction in the Dax and MDAX would have to be much higher. In the coming weeks, the profit warnings of the larger companies will be in the newspapers in rows. BASF has already made a start today. Even if profits do not fall as sharply, the Board of Executive Directors will be forced to issue such warnings for legal reasons. Otherwise, if the worst came to the worst, they would not have correctly assessed the danger and would have acted negligently. This will probably be the time when analysts will have to revalue the DAX. This means that we are currently not yet in the area of a fair valuation.
Euro rises – Oil falls
The fact that the oil price has come under pressure is certainly obvious to everyone. The coming production weeks will lead to a huge flood of crude oil on the world market. Although production quotas have been reduced, the pressure to sell remains in the market. In the near future, in cases of exaggeration, prices of WTI (Crude Oil) below the 40 Dollar mark are certainly possible. As the situation has worsened, the Euro has gained strongly against the US Dollar. It gained over 300 pips and without any significant counter movement in a few days. The important 1.1000 mark was also broken in Asian trading today.
Normally you would assume the opposite: In times of crisis, the Dollar tends to strengthen. But currently a lot of domestic money is coming back to Europe from Asia and the USA. This capital is also partly due to the strong sales of securities, which are freeing up previously tied up capital.
As critical as the situation is or can become, the possible support and resistance to the Dax should be known from a chart technical point of view. Even in panic markets there are countermovements with a high volatility. From a market technical point of view, the DAX is in a beginning downtrend with clear sell signals (red circles). The first significant chart technical support can be seen at approx. 11,393 points. If this support cannot be held in the future, then the way is more or less open for the DAX to approx. 10,371 points. In case of recovery, the original support at 12,449 points has now turned into resistance point.
The analyses shown here do not constitute investment advice and are therefore not a recommendation to buy or sell a security, a futures contract or any other financial instrument. Past performance is no guarantee of future results. The analyses provided are for information purposes only and cannot replace an individual consultation. Liability for direct or indirect consequences of these suggestions is therefore excluded.