Dusseldorf The German stock market is slightly down at the start of the week. the dax loses 0.2 percent by the close of trading and falls to 15,126 points.
Since January 12, the Dax has moved sideways in a range between 15,270 points on the top and 14,906 points on the bottom. In the past week of trading, the range was even just over 200 points, unusually low. According to an old stock exchange rule, the longer such “quiescent phases” last, the more dynamic the subsequent slide in prices will be.
The decisions of the central banks this trading week have the potential to give the leading German index a new direction. Investors pay particular attention to the interest rate decision by the US monetary authorities on Wednesday evening after the stock market in Germany closed. For the capital market expert Thomas Altmann, one thing is certain: “In view of the forthcoming central bank meetings and the fact that prices have already risen significantly, I would not be surprised if investors were a little more cautious and cautious.”
But it is very difficult to predict the new direction. Based on the expectations and positioning of the investors, however, scenarios can be developed as to how things should continue after a directional decision on the German stock market.
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The positive scenario
If the leading German index surpasses the 15,270 point mark and thus marks a new high for the year, things could go up further. That would be a surprise. Many investors have hedged against falling prices, as can be seen from the Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, and the Frankfurt Stock Exchange survey, which also includes institutional investors.
According to the current Frankfurt survey, some pessimists have parted with their short positions, but the rest of the bears are unlikely to stand idly by and watch the Dax rise again. They would have to close their short exposures and chase the rising prices. And according to Euwax sentiment, the proportion of short leverage products on the Dax is currently at its highest level in the past twelve months.
This mixture tends to favor a so-called “short squeeze”, a brilliant price jump without any corresponding news. Because short sellers rely on falling prices with so-called short sales. To do this, they borrow shares for a small fee and sell them immediately in the hope that prices will fall and they can buy back the shares at a lower price before the return date. The difference between the sell and buy price is your profit.
On the other hand, if the shares rise, short sellers lose money and have to buy back shares to keep the losses from escalating. This, along with long buying, then allows for a short squeeze.
In the event of an upward breakout, the chart technique then signals a further plus of 270, probably even 350 points. Then the Dax should be at least in the range of 15,550 to 15,600 points in the next two or three months.
The negative scenario
On the bottom, the low is 14,906 points, but the mark of around 14,800 points should be more decisive. It is quite possible that the Dax will fall lower, but the many short sellers should at least prevent a quick sell-off. Because initially many pessimists will close their positions and thus support the index.
Investors start the new trading week nervously
According to a survey by the Frankfurt Stock Exchange, the remaining bears need a Dax in the range of probably 14,700/14,750 points for reasonably profitable or loss-free buybacks. Behavioral economist Joachim Goldberg expects demand from domestic investment professionals at this level.
The highs from the stock market months of November (14,584 points) and December (14,675 points) of the past year are also in this range, ie important benchmarks for investors. There are some indications that the leading German index will find support in this area at the latest.
Nonetheless, it should be exciting. Jörg Scherer, Head of Technical Analysis HSBC After prices below 14,800 points, Germany is expecting the first serious consolidation of the year. However, given the large number of short sellers, this consolidation should not be dramatic at first.
The starting point for this rally at the start of the year is significantly lower, around 14,000 points. The 200-day line, which is the focus of long-term investors and is currently rising by around five points a day, is currently 13,613 points. The stock market barometer should test this line again in the coming weeks or months.
Dax outperformance is over
In the past week of trading, there were some significant price gains on the US stock exchanges, while the Dax only trended sideways. As a result, the temporary outperformance of the leading German index compared to major US stock market barometers since the beginning of the year has disappeared again.
The Dax has gained around eight percent since January 2nd and is therefore at a similar level to the S&P 500. What is striking is that the Nasdaq technology index shot up by twelve percent during this period, while the industry-heavy Dow Jones index is only up 2.5 percent.
This opposite development of the Dax compared to the leading US indices in the past trading week is also likely to be related to the foreign exchange market. Since its low in September 2022, the euro has risen by twelve percent against the dollar, which has made profit-taking on Dax stocks attractive for international investors. No wonder that the euro then fell slightly in the past week of trading.
Look at the individual values
Automobile Values: Give in the Dax bmwshares down 1.6 percent on Monday. After reaching the target price, the Berenberg private bank dropped its buy recommendation for the car manufacturer. the VW-Vorzüge, on the other hand, closed slightly up after the CFO made confident statements about the profit prospects in the electromobility business.
PNE: The US Investment Bank MorganStanley gives up its planned sale of PNE shares and thus puts the shares of the German wind farm operator under pressure. The shares of the company listed in the SDax fell by around 16 percent by the end of trading. Discussions with potentially interested parties about acquiring a 40 percent stake are currently not being continued, PNE announced on Friday evening.
Ryanair: The Irish low-cost airline posted record profits in the third quarter of its 2022/23 financial year and has so far performed “very robustly” despite inflation in bookings. However, the stock fell by 2.4 percent.
Commerzbank/Rheinmetall: the CommerzbankPapers closed around one percent higher after the preliminary annual figures that were surprisingly presented.
After two loss-free years based on earnings before interest, taxes, depreciation and amortization, Commerzbank also sees itself well prepared for the Linde successor in the Dax. The disadvantage would then possibly Rheinmetallwhich experts had recently seen as a replacement candidate – the shares in the auto supplier and armaments group fell by 0.4 percent.
Here is the page with that Dax coursehere there are current tops & flops in the Dax.