These was now also severe volatility in Asia, as with the Nikkei, which initially rose to its highest level since 1991, but then ended with a sharp drop. So there is a certain basic nervousness in the markets at present, and the fluctuations are now increasing again, i. e. volatility!
This was already the case on Wall Street yesterday: while indices rose sharply after initial hesitation, volatility (measured on the VIX) simply doesn’t want to fall any more. We see this as a negative divergence. Above all, however, this does not meet a basic expectation: according to Bank of America Merrill Lynch, the shorting of volatility (i. e. VIX shorts) is the most crowded trade among large investors in the USA, and these investors are currently losing money with these shorts, even though the prices of the US indices continue to rise. Something’s up! There are many indications that volatility will increase significantly in the next few days, especially if there is a government shutdown!
The Wall Street – as discussed in our video outlook – yesterday euphoric about Apple’s statements, which on closer inspection, however, were excessively over-interpreted (because Apple formulated here very vaguely, probably with the intention to impress Donald Trump!). This holds potential for disillusionment, ignoring the ever-increasing danger of a trade war between the USA and China, which according to yesterday’s statements by Trump is about to break out. The S&P 500 is threatened by a double top in the 2808 range.
Now to the Dax: yesterday’s X-Dax climbed above the 13200 level again in response to the price gains on Wall Street, but the euphoria that was noticeable at the beginning in Asia and thus in the US futures market has disappeared again. As a result, the German benchmark index in early X-Dax trading has so far not been able to sustainably outperform the 13200 level:
(Click to enlarge the chart)
What the Dax simply has to do is to climbe above the zone 13340/50 – that’s the make or break level. On the downside, on the other hand, look t the support at 13130 points, which should not be undercut. Everything between 13130 and 13340/50 is basically no-man’s-land, so for those who are not invested, it’s time to wait and see in which direction the train will go…