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The development of the coronavirus pandemic also remains in the focus of investors.
(Photo: dpa)
Düsseldorf Weak trading day on the German stock market: In the morning, the Dax was down 0.2 percent at 13,109 points. Yesterday, Monday, the index was 0.5 percent stronger at 13,139 points.
Yesterday was quite disappointing for the market as a whole, despite the price gains. After the Moderna report on vaccines, the German leading index rose 130 points in a short period of time, gave up these gains at the close of trading and finally closed at its original level.
To put it another way: losses on crown-winning stocks such as cook box mail order company Hellofresh (minus 4.6 percent), as well as software company Teamviewer and fashion platform Zalando ( each minus 3.9 percent) corresponded to earnings from cyclical stocks. Mining company K + S’s stake rose 7.5 percent, Lufthansa’s 7.4 percent and Fraport’s stock 6.5 percent.
This scenario is likely to repeat itself in the coming trading days and weeks. Whenever the corona infection numbers skyrocket, the shares of the crown winners will increase.
But every time pharmaceutical companies release successful test results, cyclical stocks will rise. Because the market expects the Covid 19 virus to no longer have a major impact on economic development by the fall of 2021 at the latest.
Today, Tuesday, the spotlight is back on rising crown numbers: Winners include shares in pet food mail-order company Zooplus up 4.3 percent. The company is benefiting from the corona pandemic; In the first nine months, revenue increased by almost a fifth and operating profit soared from € 6.7 million to € 47.8 million.
Hellofresh stock also tops MDax’s winners list on Monday with a plus of around three percent, Thyssen-Krupp being the biggest loser in the small-cap index at minus around four percent.
But how should the Dax be developed in general? Due to the reaction on Monday, there are growing signs of an imminent correction in the German stock market. These price losses need not be dramatic, most likely a “cleaning storm” that could form the basis for a later year-end rally. But there are at least four reasons for a big hiatus ahead.
1. Habituation effect on vaccine reports
After Moderna’s announcement, many investors expected an equally strong and above all sustainable price jump as on Monday last week, when Biontech published a successful announcement regarding the corona vaccine. But the barometer of the German stock market fell back to its initial level yesterday Monday. This leads to the conclusion: the news was apparently no longer great news, but was seen in the market as a repeat of the Biontech news.
This leads to a habituation effect: most investors bought a week ago. Without some fundamental new news on a corona vaccine, the overall market will struggle to keep growing.
2. The price level is too high for investors.
According to the current Handelsblatt Dax Sentiment survey, willingness to invest is falling. The rate has dropped from over 3.8 to a value of just 3.4. That is still a solid level, but the highs of the previous two weeks have waned.
“Either people have bought in the meantime, or I think the prices are too high for investors to buy,” explains sentiment expert Stephan Heibel, who evaluates the weekly survey of more than 3,600 investors. Also for him, the risk of correction has increased significantly.
3. The situation in the United States is increasing
In the US, the number of corona pandemic-related infections and deaths is increasing exponentially. More than 11.14 million infected people and 246,854 deaths have already been registered. And the numbers will keep increasing. Because there has been a power vacuum in America since the American presidential election.
Donald Trump lost the election but does not want to leave the White House. Nobody knows what happens next. The danger behind: In light of Corona’s dramatic numbers, Americans are imposing a “private lockdown” with negative effects for many businesses in this consumer-friendly country.
Furthermore, governments in Europe are trying to cushion the long-term economic consequences with expansionary fiscal policies. In the United States, there appears to be fundamental opposition from Republicans, and it seems a long way from a second urgently needed fiscal package.
4. Technical indicators signal a respite
The German top index has risen 15 percent since the end of October, a rapid rally that now suggests a respite. The stock market barometer has risen too fast, from a technical point of view the index is “overbought”.
In the last five business days, the Dax has experienced slight daily fluctuations. The same scenario is present in the US, where the dynamism of the main indices has already weakened significantly. There is apparently no momentum for further price increases.
According to technical analysis, prices below 13,000 points should mark the beginning of the correction. The low of this five-day trading range is 13,005 meters.
Look at the individual values
Easyjet: The low-cost carrier has had the first annual loss in its 25-year history of the company. In fiscal 2019/20 (end of September) there was a pre-tax deficit of 1.27 billion pounds, as announced by Ryanair’s competitor. The previous year there had been a profit of £ 430 million on the balance sheet. Like all other airlines, EasyJet adds that significantly fewer flights are being booked in the corona pandemic. The share is down 2.4 percent in the German market.
See other asset classes
The Chinese yuan rose to its strongest level in more than two years on Tuesday, fueled by optimism about the country’s economic recovery and significantly higher interest rates compared to Europe and the United States.
In return, the dollar fell against the yuan from 8,229 to its current level of 7.77 yuan in three months, 5.2 percent more than in the same period. Apparently, the Chinese central bank seems to tolerate the strength of the national currency.
But Commerzbank is seeing the first warning signs of the ongoing recovery in the Chinese economy. Examples of this, according to currency analysts, would be the risk of more payment defaults, such as defaults by a chipmaker and an automaker reported Monday. “This is unlikely to stop the recovery,” said analyst Charlie Lay. “But the relentless strength of the yuan could take a break.”
What the graph technique says
For the Dax, the next major resistance zone is at last week’s Monday high of 13,297 points, which was almost reached with yesterday’s high of 13,277 points, and extends to September’s high of 13,460 points. There is the so-called Corona high, the highest level since the drop in mid-March, when the Dax fell to 8255 points. Should the barometer break the mark, the record of 13,795 points will be targeted.
In the short term, investors should pay attention to the trading range of the last five days: a correction below 13,005 points would start, above 13,297 points there should be more price gains.
On the downside, strategic stop loss levels offer some gaps to the upside as supports. These gaps arise when the highest level on one trading day is below the lowest level the next day. Based on graphics technology, they are considered media.
Specifically: The highest level on Friday (November 6) was 12,596 points, the lowest price on Monday (November 9) was 12,671 points. As long as the Dax remains above 12,671 points, from a technical point of view there are no doubts about the current rally.
Here you go to the page with the Dax course, here you can find the current tops and flops in the Dax. You can find current short sales of investors in our short sales database.
