DAX Market Analysis, August 2021

DAX Market Analysis, August 2021

den 12 augusti 2021

The DAX index net movement for July ended with only a net gain of 30 points, which is the lowest gain for July for the last 10 years. DAX closed the month around all time high where also Juny ended up. However, volatility was high where the difference between the monthly high and monthly low was 760 points (around 5%). On the upside, the yearly pivot R1 provides resistance when the monthly exponential moving average EMA6 provides support. EMA6 was broken in october 2020 and has since then been providing support several times for the index.

To sum it up, DAX is still in a boring up trend phase where nothing seems to break the trend. Several traders have started talking, that the market is broken and non logical but on the other hand companies in the USA have presented better results than expected and thus reducing the over valuation. Usually when the indices in USA is gaining, DAX usually follows (and vice versa). An interesting note is that August is the most significant vacation month in Europe and thus trading volumes is expected to be lower but also that August has historically been the weakest month of the year for DAX, with a net movement of around -2%

At the same time the difference for DAX to its EMA6 average is very stretched and thus short sellers are on the move. EMA6 has been tested last time 10 months ago which is historically a long period. During 2017 DAX had a similar bull run with 9 months without testing EMA6 and since 2010 no further observations of such a long streak. Further more indicators are starting to show weakness (more on this later in the report).

Note: Past performance is not a reliable indicator of future results.

Long term levels of support: 14500, 15200

Long term levels of resistance:  15650, 16000

Below on the weekly chart it is clear how DAX continuously moves around the moving averages EMA6 and EMA12. During the 3rd trading week for July, DAX broke its EMA12 significantly but the correction was bought by the bulls which resulted in a bullish weekly candlestick. Also June all-time high was tested but not broken. Good trading opportunities were available in both directions.

Note: Past performance is not a reliable indicator of future results.

Medium term levels of resistance: 15750, 15900

Medium term levels of support: 15000, 15480, 15520

Because of the historically weak performance for August, it is hard to find a bullish longer term case right now where also trading volumes are expected to dry up. Thus it is advised to be extra careful in the markets right now. Further EMA6 (15516) testing could still be a good entry point for shorter term bullish swings. One example could be:

For the short trade, good entry point could be levels 15650-15750, space on the downside towards 15100 should be possible.

US investor sentiment - a month ago we said that there are no dark clouds in sight - now however bearish sentiment has risen somewhat.

Note: Past performance is not a reliable indicator of future results.

Historically August has been the weakest month for the DAX

Above: McClellan oscillator started to decline which is a clear indication that the short side could be the direction for August

Above: Split of stocks in DAX index that are above or below their respective DMA20 averages. This indicator was not bullish during July and the downward trend continues.

Above: Summary of technical indicators of stocks in DAX index. Previous strong buy have started to show some weakness.

Note: Past performance is not a reliable indicator of future results.

Note: Past performance is not a reliable indicator of future results.

Above: DAX historical weekly and daily changes

World’s main futures: Technical indicators still in strong buy mode

Important Notice

This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the securities, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. Past performance is not a reliable indicator of future performance.

2023-02-03 11:23:42


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