The Dax was able to recover recently – but is this rise really continuing?
The stock markets are known to trade the future. While some are still in the presence panic, the big capital is already thinking ahead and trading. But one thing is certain: not a day goes by without the situation in the Corona crisis worsening.
Nevertheless, the Dax has a strong desire to move back above the well-known resistance level of 10,000 points. Yesterday’s statements by the famous five economic wise men in Germany, also describe a not so gloomy picture for the future. Only 2-5% economic growth is expected to lose the german economy in the clearly declared recession. Perhaps our wise men are already a little old or live in another country. Our entire national economy is more or less out of action for a whole month and 50% of our middle class is struggling with a possible bankruptcy. But our wise men speak of only 2% economic shrinkage! The effects will be long and much harder than expected. We are talking about imminent nationalizations. Also, the state will not be able to absorb the entire damage with possible new debts.
In recent years, the Dax has always come out of a crisis in good shape and has been able to rise in the long term. This will probably be the case this time as well. However, the damage will probably be much greater than expected, which is why a further upswing after more than 10 years of rise will have to wait.
The Dax hangs on time
Every day that passes without positive news will cost the German economy many billions. It is therefore a question of time when normal operations can be resumed. But there is the famous point of “no return”: it is the inflexion point when a crisis can or cannot be overcome without much fuss. Once this point has been passed, however, long-term consequences are discussed that are difficult to make up for. This is the realistic picture of the current situation. In today’s world, citizens need courage and encouragement – not gloomy prospects.
As far as the economic situation is concerned, the all-clear cannot be given at present. The fact is, the remaining words are for the people’s souls and for reassurance. The time factor is therefore more than just decisive. It is a matter of days – and most people are not even aware of that.
Dax struggles with the 10,000 mark
In addition to the psychological 10,000 mark there is also the resistance of the EMA 420 (exponential moving average). The chart clearly shows the failure of the Dax on this line several times. Since this is a dynamic resistance and is pulled down due to the time factor, a double resistance in the range of 9,950 and 10,000 points is formed. Strong arguments are needed to break through these two marks in the long term. Admittedly, these can occur at any moment. But if one starts from the short-term events, then even better entry prices can be seen in the Dax. Much better for the longer-term investor is the hunter-gatherer strategy: hammer the nail into the wall and buy a small starting position. Then, when good opportunities arise, buy on a small scale and form a good mixed price.
Still volatile markets
The diversity of opinions is still very large, so we must also observe these enormous daily fluctuations. If one assumes the current technical condition of the Dax, the German leading index will be held back at its aforementioned resistance. Breaking this resistance should be difficult. The first sell-signals (red circles) are already formed. A correction up to the 9.360 level is expected. Should the resistances be taken into the 10,000 point range against expectation, then there is still much air at the upper side. However, this scenario is to be classified as rather unlikely. The market needs clear facts to make clear decisions. These are not yet available, so the volatility in the Dax & Co will remain high.
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.