Markets

Ideas for the DAX start in June after a strong May

What can you expect after the recent rally in the DAX? A strong May in the DAX creates imagination for another summer rally. Where are the brands located?

The DAX showed almost 7 percent price gain (ISIN DE0008469008 | WKN 846900) in the calendar month of May and was able to build on the recovery from April. The subject of recovery after the Corona period dominates on the stock exchange, but this is not yet over.

As in the previous week (here for analysis), the DAX started very strongly in the last May trading week. He moved on directly in the large GAP from the start of March and let it melt away in the spring sun (review Monday):

Review of the DAX-GAP

On Tuesday the time had come: the GAP was closed. With a tolerance of 3 points we stood in the course area from the beginning of March. A reason for consolidation? Nothing! There were further buy signals and announcements, especially for medium-term investors, which suggested that this trend should continue.

Accordingly, the trades were rather easy on the long side, which could be based on trend lines:

DAX trading on the long side DAX trading on the long side

Driven by the imagination of the Lufthansa rescue package and a specific aid package for the automotive industry in France, these two sectors benefited disproportionately. Bank stocks also continued their recovery after the US Federal Reserve repeatedly spoke of further necessary and feasible financial aid. The EU followed suit and adopted a 750 billion euro aid package.

The rally therefore continued until Thursday, as the following review shows:

DAX review Friday to Friday DAX review Friday to Friday

The weekly high of 11,813 points was the high of the movement so far on Thursday. The prices fell somewhat on Friday, as the overview of the individual trading days shows:

DAX trading days of KW22 DAX trading days of KW22

On balance, however, this was a very strong week. If you look back at the entire month, the DAX performance per month is impressive (graphic by wallstreet-online) and fits seamlessly into the recovery of April:

DAX monthly balances DAX monthly balances

With a view of Wall Street (where the recovery was even stronger), it is now curious how far this movement will continue. For example, the Nasdaq technology barometer is only around 3 percent from its all-time high in February:

Nasdaq and its all-time high Nasdaq and its all-time high

So let’s look directly at the DAX.

It was clear to see that this trend has a very high momentum. One should not stand in the way of such dynamics “unchecked”. This means trying to hit a possible top and to position yourself short. In the end, waiting for a signal is healthier for the account, even if there were always opportunities intraday. However, these were not enough for a sustainable movement.

Looking at the development of the entire week, however, at least a consolidation could occur on Friday:

DAX breaks weekly trend DAX breaks weekly trend

In the short term, we are repeatedly supported on the 11,580 – but this area breaks, further levies under the GAP edge are expected at the beginning of March at 11,540 points and the GAP from Tuesday is to be considered:

DAX between two GAPs DAX between two GAPs

The first trigger is therefore the 11.580 for my trading and the zone around 11.380 to 11.440 an exciting target. Until then, a turnaround would only be a consolidation of the previous week’s trend. Investors should only get nervous at prices up to 11,250 as the breakout level of the last four trading weeks and if this level should break.

Also visible in this chart image was the GAP on the top last Thursday. With prices above 11,720, this path could represent another attempt for the bulls to maintain the larger trend and, if not as steep as on the first four trading days of the past few weeks, to tend to continue upward.

A “Sell in may …“Did not take place statistically and at the beginning of June this situation could” discharge “again on the top.

The signal generator for this could be Wall Street, which trades normally on Whit Monday compared to the German stock exchange. I had already pointed out the Nasdaq chart and its close proximity to the all-time high.

For the DAX, this would mean a further “immersion” in the trading zone from late February / early March. This is widely visible in the large chart picture and takes place up to around 12,230 points:

DAX in a 4-hour chart DAX in a 4-hour chart

In this larger time setting, the trend would still be intact after a few days of consolidation. A relapse below 11,250 would be the first warning signal for the bulls on an end-of-day basis.

What makes the mood a little cloudy? Unrest and protests in the United States regarding racism, US President Donald Trump’s tough stance against WHO and initial reactions against China in Friday’s press conference. In addition, there are two important dates for the US labor market and the ECB meeting, which should give the market decisive impetus. We are now looking at this at the end of this weekly analysis.

The new week and the new month start with the Tankan report from Japan. Monday is stock exchange holiday in Germany, but the purchasing manager can still look at 9.55 a.m. and the DAX indications can be traded at various brokers. In the afternoon we expect the Markit PMI manufacturing index at 3.45 p.m. and the ISM index of incoming orders and the employment index for the manufacturing sector at 4.00 p.m.

On Wednesday we get an insight into the state of our labor market with the labor market data from Germany, 10 a.m. from Italy and 11 a.m. from the EU. 2:15 p.m., data from the United States follow with the ADP employment change. At 3:45 p.m., the Markit PMI index for services from the United States and 4:00 p.m., then the ISM index for the non-manufacturing sector will be in focus.

Thursday is marked by the European Central Bank – with the ECB’s interest rate decision at 1.45 p.m. and the subsequent press conference at 2.30 p.m., we get an insight into the future policies of our bankers. At 2:30 p.m., initial jobless claims from the United States are published in parallel with the U.S. trade balance and U.S. unit labor costs.

For Friday, you should note the work orders from Germany at 8 a.m. and then the labor market data from the US at 2:30 p.m. How do the initial applications of the individual weeks affect the overall balance? Unemployment is forecast to be 20 percent. This economic figure should again cause volatility at the end of the week.

You can find all the circumscribed dates here as a graphical overview with forecasts:

Weekly appointments KW23 / 2020 Weekly appointments KW23 / 2020

Start the summer month of June 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 at this point:

https://www.ariva.de/forum/2020-qv-gdaxi-dj-gold-eurusd-jpy-566939?page=463#bottom

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