For Martin Utschneider, technical analyst at the private bank Donner & Reuschel, the American Philadelphia Fed index, which is considered to be the leading indicator for the important purchasing manager index, is likely to cause a bitter disappointment. “Coupled with the current market technology of the Dax 40, a slightly impulsive mixture,” says Utschneider. He locates the lower limit of the Frankfurt benchmark at 15,233 meters.
With this in mind, investors shouldn’t expect much from today’s trading day. The chances are rather bad that the Dax will sustainably rise above 15,527 points. That is the upper limit at which the leading index has always failed in the past few days and which accordingly forms a first hurdle for further price increases.
Investor sentiment does not bode well in the short term either. According to the latest survey by the Frankfurt Stock Exchange, there was a change in sentiment among institutional investors: the number of optimists among professionals has risen sharply and, in a comparison over six months, is at the highest level since the survey began in 2002.
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For Joachim Goldberg, who evaluates the survey, this is almost a “surrender of the bears”, especially among the professionals. According to the sentiment analysis, such a high level of optimism is an enormous burden for the Dax, which usually leads to significant price declines. Put simply, there will be a lack of new buyers.
For the former forex trader Goldberg, profit-taking from current investments should not be long in coming if the Dax does not maintain the current momentum. Because the demand from domestic investors, who presumably caused the mini-rally of the previous week with their purchases, has thinned out.
The current sentiment survey by the American Association of Individual Investors (AAII) does not look very constructive either. Since mid-September, the proportion of bulls among US private investors has more than doubled to 46.9 percent. Reluctance looks different.
However, another number speaks against a Dax crash: The cash quota of international investors is 4.7 percent, as can be read from the Bank of America survey of October 14th. For Goldberg this is “a comparatively large amount of ‘fuel’ for possible acquisitions from abroad”.
Which industries have benefited from the rise in interest rates
Interest rates have risen significantly since the beginning of the year. The value for a ten-year federal bond was still minus 0.599 percent at the beginning of January, currently it is only minus 0.118 percent.
Such a rise in yield inevitably leads to a change of favorites among the industries on the stock market. To put it simply, value stocks such as cyclical industrial stocks and banks benefit disproportionately from this development.
A look at the chart comparison of Euro Stoxx 600 and the respective industries clearly confirms this development. Other sectors such as technology or real estate, on the other hand, only grew at a below-average rate.
But what happens next? For the JP Morgan capital market expert Tillmann Galler, who has been seeing more opportunities in value stocks for a long time, one thing is certain: “Looking ahead to next year, the expanding recovery in combination with slightly higher interest rates is likely to affect the value segments of the global stock market support.”
Because the delta variant of the corona virus prevented a complete return to normal. “However, our base scenario expects only minor effects on activity compared to previous infection peaks,” says Galler. Ultimately, demand will only tend to be delayed, as the solid financial situation of private households and the strong labor markets provide a tailwind.
In the past, rising bond yields have not only resulted in a sector change in the stock market, but have also brought other regions and other investment styles to the fore. According to the evaluation of JP Morgan With rising yields on US government bonds, investors not only benefited disproportionately from value stocks, but also achieved a higher performance with smaller stocks (small caps) than with the market as a whole.
In terms of regions, the focus is on Japan and the euro zone, while the US indices have underperformed slightly with rising bond yields in the past.
“The longer the threat of high inflation, the greater the fluctuation range of the Dax”
Look at individual values
SAP: One year after the historic price crash, CEO Christian Klein presented the company in good condition. According to the recently raised forecast, he expects even stronger business for the year as a whole. That makes the stock rise by 2.5 percent.
Software AG: The number two in Germany behind SAP managed to increase sales in the third quarter, while operating profit remained almost stable. The share rises by 3.5 percent. It wasn’t until Monday evening that the Software AG adjusted their goals and scared investors above all with the ailing digital business.
Continental: A negative analyst comment weighs on the price. The shares of the auto supplier fall by one percent to around 96.77 euros. The experts at the British bank Barclays have lowered their target price from 125 to 95 euros.
Amadeus Fire: Increased annual targets encourage investors to join Amadeus Fire. The shares of the personnel service provider initially rose by 3.7 percent to a record high of 195.60 euros. In the meantime, the share is only listed one percent plus at 189.80 euros.
Immofinanz: The shares of Immofinanz are trading this Thursday with a dividend discount of 0.75 euros. Compared to the previous day’s close of 20.80 euros, this means a decrease of 3.6 percent.
Lira decline is spilling over into the banking sector
The surprisingly significant cut in interest rates by the Turkish central bank from 18 to 16 percent and the slump in the local currency are affecting BBVA shares. Shares in the Spanish bank, which is heavily involved in Turkey, fell 3.3 percent in Madrid. The titles of Turkish institutes such as Is Bankasi or Garanti Bankasi each lose almost three percent in Istanbul.
In return, the dollar and the euro each rose by almost three percent and are more expensive than ever at 9.4782 and 11.0064 lira, respectively.
Okan Akin, credit analyst at Alliance Bernstein in London, had said earlier this week: “An extreme devaluation would violate confidence and Turkey could face a currency liquidity crisis” – a very big risk if the US Federal Reserve eased its policy Monetary policy expires. “A strong devaluation would weaken banks’ capital ratios and trigger a sell-off in bank bonds.”
What the Dax chart technology says
According to the technical analysis, the medium-term Dax picture is gradually improving: The Dax has held the strategically important zone slightly above the 14,800 mark. The long-term important 200-day line, which is currently at 15,101 meters, has not yet been undercut on a sustainable basis.
With the new highs in October, an important trend-following indicator generated a buy signal. The name for this is MACD (Moving Average Convergence / Divergence) and consists of two moving averages.
For the technical analysts at HSBC Germany gives this indicator “for the first time since the end of July a buy signal” – the best since November 2020. To explain: In both cases, the Dax then rose significantly. In November 2020 the stock market barometer was at 11,450 points, then the starting signal for the vaccine rally was given. And in July the Dax slipped down to 15,000 points, after which the record high of 16,030 points was reached.
However, the resistance on the way up is varied, especially in the range between 15,550 and 15,600 points. The breakout beyond that should be seen as the next buy signal towards a record high.
Click here to go to the page with the Dax course, here are the current tops & flops in the Dax.