Corrections are inevitable and, in the long term, eminently important to markets. Moreover, they are – if you want to be honest – a little salt in the (stock market) soup, because now it is important to keep track and make the right decisions. The problem with corrections is often that you do not immediately recognize them as such. They sneak up and then surprisingly get going.
For weeks, however, we have been broaching at this point the Dax’s inability to create a new upward momentum. He finally coupled with the developments of Dow Jones Ind. And Nikkei 225 and let themselves be more or less strongly involved, thus fading out a little of their own problems – a clear warning signal. The US indices and the Nikkei 225 are now stretched as draft horses until further notice and the result can be seen in the development of the Dax impressive.
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Two key issues are on the agenda for global equity markets – one being the fear of rising (in doubt even faster than expected) interest rates in the US and the fear of the impact of global trade conflicts; especially the effects of the US conflict with China. For the Dax, the topic of Italy and the Brexit hanging section also have a certain relevance.
The mood is currently becoming increasingly gloomy, as well as the current ZEW data, which on 16.10. have been published. In the next week, more precisely on 25.10., There will be the Ifo data. Also, you should take a close look. Let’s get back to the Dax.
Actually, after the failure in the resistance zone in the last issue, we had set ourselves 12,500 / 12,640 points for a leisurely sideways movement in the limits of 12,500 / 12,640 points on the top and 12,100 / 12,000 points on the bottom. But this expectation was known to be pulverized.
Since the last fall of the Dax below the 12,000 points was then also clear that the good times in the Dax over for now. The fact that the Dax then not in the range of the March low (11,730 points) came to a halt, reinforced the impression. Only in the field of 11,450 points, the movement came to a standstill. We once presented the current situation in a 3-year chart on a weekly basis to derive potential movement targets on the bottom.
The Dax succeeded in the previous week to bring the first correction wave in the range of 11,450 points to a halt. Thus, the first important movement goal was achieved. The subsequent recovery, however, has so far missed a reasonable impact. Currently, the index is trading at 11,560 points and threatens to slide back towards the movement low. Should this also not be able to withstand the pressure of sales, the movement is threatened to continue in the direction of 10,800 points. However, if the index succeeds in recapturing 12,000 / 12,100 points, that would be an important sign of relaxation. In short: a Dax note below 12,000 points, in our view, continues to pose the danger of new sell-off waves. The 11,450 points should not be undercut, if not, would continue to threaten the movement to the range of 10,800 points. Currently “crash warnings” are booming again. This is not uncommon in correction phases. We do not (yet) go that far. A crisp downward movement in the direction of 10,800 points or even towards 10,200 points should, however, be taken into account. In addition, one should continue to follow the development of the gold price, because this also provides information about the sensitivities of investors.