Markets

DAX 11,000 first solidly conquered, green May end?

Our DAX (ISIN DE0008469008 | WKN 846900) was able to fight solidly on the top of its multi-week range in the past trading week and then close several times above the round mark of 11,000 points. This brightens the chart image accordingly.

Already on Monday the stock market started strongly and seemed to put the indecision directly on ariva as a conclusion of the previous week’s analysis. With a gain of almost 6 percent on a trading day, the index skipped all short-term resistance. The course was driven by the announcement that a possible active ingredient against Covid19 delivered promising test results from Moderna. The following day, this was then partially revised or at least presented less euphorically, so that the share price itself no longer continued to rise.

The tendency on the stock market is, however, because with the conquest of the 11,000-strong region there were more buyers on the stock market. The level is right in the middle between the all-time high and the corona low from March – a signal mark in many ways. If a sustainable overcoming succeeds, the correction is completed at least in the chart picture and the next buy signal generated.

For the market as a whole, however, these were reasons to buy and the comparatively high level in the DAX did not deter the following days. On the contrary: the German stock index closed at over 11,000 points on every trading day, even if it (apart from Thursday) now traded under this round mark once every day. At first glance, this looks very bullish:

Looking back at the DAX week

A look at the trading days shows four winners and only one day of loss. This was created on the holiday, which did not lead to a closure on the stock exchange. The trading volume shows that the market participants held back accordingly on Friday, when there was no change on balance:

DAX trading days in KW21 / 2020 DAX trading days in KW21 / 2020

Overarching one can look forward to another decision. Not only in relation to the round mark of 11,000 points, but also for the next move on the stock market. Because for the coming start of the week, the chart picture should initially be similarly reserved:

DAX decision expected DAX decision expected

In addition, there will be no trading on Wall Street tomorrow, so there is no important source of inspiration.

After all, May is now back in profit and a “Sell in may …“did not appear. Resistance can still be felt. So for the third time we ran into the 11,200” solid “and thus established resistance:

Focus on DAX resistance Focus on DAX resistance

What do we derive from the chart picture after this week?

The resistance shown is the last threshold before the big GAP from early March. It can be clearly seen in the larger time frame:

GAP in the Big Picture DAX GAP in the Big Picture DAX

Up to this point, there was a 3,000-point rally from the low point, which could possibly run out of breath here:

Upward movement in the DAX in the medium term Upward movement in the DAX in the medium term

After all, we failed several times in this area and then fell back into the broad trading range between 10,700 and 10,200. This scenario could happen again:

Rewind in DAX range? Rewind in DAX range?

This requires another stitch below 10,980 points and then corresponding dynamics in the direction of the trend line shown.

The market will be supported up to the trading area from Friday morning. Marked in green, it offered buyers an attractive risk-reward ratio several times:

DAX support zone DAX support zone

The words of the Federal Reserve chief Powell, who held out the prospect of further liquidity, were certainly appropriate support. There are also plans from Europe to initiate further measures. But more about that in the preview.

In summary for the DAX, I watch for the momentum above the 11,200 and speculate on the large GAP-close from the higher-level chart if there is a breakout.

If we fall below 10,980 points, the short side and thus the large range up to 10,200 on the bottom is my favorite. On the way there we have another GAP from this week from the euphoric start of calendar week 21:

Bearish DAX scenario Bearish DAX scenario

It remains exciting despite the US holiday. The following framework data is now after the end of the quarter season to watch out for.

Our GDP will be in focus at 8 a.m. on Monday. A decline of 2.2 percent compared to the previous quarter is expected here. At 10 a.m., the ifo index with business prospects is another impetus for the capital market. There, the forecasts are again on a slight increase.

Tuesday 8:00 a.m., Gfk consumer confidence adds further data from Germany, before at 2:30 p.m. the US exchange with the Chicago Fed activity index starts the trading week on Wall Street. The United States is followed by the real estate price index at 3 p.m. and the consumer confidence conference board at 4 p.m.

On Wednesday, we expect the EU Financial Stability Report at 10 a.m. and the US Richmond Fed Production Index at 4 p.m.

The EU business climate index is due for Thursday at 11:00 a.m. and then a lot of data from the USA from 2:30 p.m. Orders received for durable goods, annualized gross domestic product and as a price index core expenditure for personal consumption as well as, like every week, the first applications for unemployment benefits.

Friday starts at 8 a.m. with German retail sales and 11 a.m. with the EU consumer price index. At 2:30 p.m., the view will again focus on the US data with personal income and private expenditure. The Chicago Purchasing Managers’ Index at 3:45 p.m. and Uni Michigan Consumer Confidence at 4:00 p.m. round off the dates of the trading week.

Get through the last trading week of May well and above all stay healthy.

Good luck, Andreas Bernstein (Bernecker1977)

Feel free to look into the trading chat for more opinions

or in the forum here:

https://www.ariva.de/forum/2020-qv-gdaxi-dj-gold-eurusd-jpy-566939?page=450#bottom

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Risk warning: Trading in financial products is risky. You can lose your invested capital. This analysis is not a trading recommendation and only contains non-binding analyzes and forecasts of current and future market conditions. All information given in this publication is provided for information. They should not be understood as an offer or recommendation for investment decisions.

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