Wednesday, June 3, 2020

The Dax continues the rally

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Dusseldorf The upward trend on the German stock market continues: in morning trading the Dax rises by 2.2 percent to 10,560 points.

The Investor question of the entire trading week has still not been answered: Do the price gains just mean a bear market rally, an intermediate recovery in the intact downtrend, or the beginning of a sustainable rally? In the area of ​​10,391 counters, chart technicians see the important key zone for this, which must be overcome in the long term for further price gains.

Sustainable means: The Dax should at least be above this mark at the close, better three trading days in a row. The leading German index rose to 10,590 points on Tuesday and went out of business under the brand.

In simple terms, technical chart analysts try to predict the further development of stock prices and stock indices by comparing recurring price patterns from the past with current chart graphics.

Investor sentiment sees things differently. The analysis of the Handelsblatt survey Dax-Sentiment recommended investors to sell their shares in the current rally because of the risk of another crash.

The results of the current investor survey by the Frankfurt Stock Exchange show a mixed picture. According to the survey, many professional investors used the price gains at the beginning of the week to sell their shares, while private investors hardly changed in their investments.

Joachim Goldberg, who evaluates the weekly survey, suspects that the professional investors who sold their shares are on Prepare clearly falling courses. The behavioral economist assumes that most pessimists have made their hedges at significantly lower prices and therefore sees proper support only from 9800 points in the leading German index.

However, should the Dax continue to rise, the pessimists are likely to come under further pressure and have to buy shares again. This scenario was the reason for rising prices at the beginning of the week According to Goldberg, short-term investors have with their purchases fueled the “rally held” by many investors.

Conclusion of this survey: The rally can go a little further. However, if the prices give way, significant losses are imminent.

The non-trading Easter holidays are a test for the stock markets”Predicts Robert Halver, head of capital market strategy at Baader Bank. If the Dax continues its fluctuating price gains, the signs are at least good for bottoming out. Otherwise, extensive profit-taking could lead to renewed price setbacks by nervous investors. “The decisive factor is whether virus and economic data deteriorate even more than they are priced in on the stock markets,” says the expert.

Perhaps the important US economic data on Thursday will decide the further course development, especially the weekly initial applications for unemployment benefits. Is the wave of layoffs ebbing away?

The market consensus is again expecting an extremely high figure of over five million people seeking state support. This would mean around 15 million new unemployed within three weeks. That would be one Total employment of just over 150 million around ten percent.

With this in mind is not one Mood stabilization among consumers to count. The provisional Michigan Sentiment, which measures the propensity to consume in private households, should drop again significantly.

Fed chief Powell also gives a speech at 4 p.m. Central European Time. The US reporting season will also begin next week.

Look at the individual values

SAP: The corona epidemic is clouding the growth prospects of the software manufacturer. Business in the first quarter was significantly worse than forecast at the beginning of the year. Due to the crisis, customers have postponed “a significant number of new contracts”, which is reflected in a significant decline in license revenues, according to a statement published by the software manufacturer ad hoc on Wednesday evening after the market closed.

In response, the share gained 1.6 percent in a friendly market environment because investors apparently expected this news. With a weight of ten percent, the paper has the greatest influence on the Dax. Because the software group has by far the highest market capitalization of all 30 index values

Lufthansa: In the corona crisis, the airline runs out of millions of dollars every hour. According to Lufthansa CEO Carsten Spohr, the company loses about one million euros in liquidity reserves every hour, and that probably month after month. The airline carries fewer than 3,000 passengers a day instead of the usual 350,000. In the morning trade, however, the paper gains 2.5 percent.

Given these high losses, it’s no wonder that the stock has come into the focus of hedge funds. They increased their speculation on falling prices earlier this week. The proportion is now 10.28 percent of all freely tradable shares, a very high value.

Betting on falling prices, known as short sales, works according to the following principle: Investors borrow shares in companies where they expect price losses. They sell these papers afterwards and hope that the prices will drop. Then you can buy the shares back later and give them back to the lender.

So investors should not be surprised if Lufthansa should suddenly rise significantly in the coming days. Then the hedge funds dissolve part of their speculation.

Because at some point the hedge funds will have to buy back around 49 million shares. With an average trading volume of eleven million shares a day in the past three months, a high value.

Gerresheimer: The packaging manufacturer producing for the pharmaceutical and cosmetics industry sees itself well positioned in the corona crisis and therefore confirms its annual targets. According to this, the management board is aiming for a sales increase in the mid single-digit percentage range and an adjusted operating return on sales of around 21 percent. The share gains more than four percent.

Look at other asset classes

The euro remains unchanged at $ 1.086. Before the euro finance ministers agree on a further course of action in the corona crisis, they are Outlook for the single European currency negative. The hopes for a stronger convergence of the euro countries, which had arisen temporarily in 2017 and which had given the euro a boost of $ 1.20 and $ 1.24, should already have been buried anyway. The differences of opinion came to light recently.

Oil prices are recovering continued on Thursday despite the ongoing weakness in demand. In the morning, a barrel (159 liters) of the North Sea Brent cost $ 33.42, 1.7 percent more than the previous day. The price of a barrel of the American grade WTI rose 4.3 percent to $ 26.11.

The meeting of Opec plus on Thursday and the G20 oil summit on Friday should be decisive for the further price development. Experts believe it is important that the oil price be stabilized in order to avoid unnecessary credit risks amid the already unpredictable negative economic effects of the corona shutdown. A lack of agreement on the production volumes can lead to a new sell-off on the oil market and thus burden the stock market again.

What the chart technique says

The battle for the important mark of 10,391 points remains because the leading German index has not yet managed to overcome it by closing price. Maybe the index will make it this Thursday.

If this relief is successful, the next target is the large downward price gap from the beginning of March in the range of 11,032 to 11,447 points.

“Every fifth company in Germany could go bankrupt”

On the bottom there is a multitude of upward price gaps that show how difficult it is for investors to value the market.

Such price gaps arise when the highest price of a day remains below that of the following day. Yesterday Tuesday the lowest price was 10,225 points, the highest price on Monday was 10,097 points. Such upward gaps are important resistance according to chart technology.

“From a risk point of view, this upward price gap is predestined as a hedge,” say the technical analysts at Düsseldorf Bank HSBC. If the leading German index falls below the 10,097 point mark, the risk of further, significant price losses increases.

Here is the page with the Dax course, here are the current tops & flops in the Dax. Current short sales by investors can be found in our short sales database.

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