The course of trading on Wednesday yesterday showed the typical behavior of a bear market: negative reports lead to a quick sell-out. An extremely weak Ifo index ensured that the Dax slipped by 650 points within a short period of time. By definition, the leading German index has been in a bear market since mid-March because it slipped more than 20 percent from its record high (13,795 points) in mid-February – this was the case at around 11,000 points.
The fact that the Dax went off the market on Wednesday after a final spurt of plus 1.8 percent and 9874 points was also due to profits on the US stock exchanges. The Asian stock exchanges were already weaker.
The behavior showed a similar behavior as on Wednesday German stock market even before the stock exchange opened. The pre-market indicators slipped significantly after GfK market researchers published consumer sentiment for Germany. The virus crisis is depressing sentiment to the lowest level since the global financial crisis. According to GfK, consumers see “very difficult times” coming up economically for Germany. “Hard times will come for the trade as a whole,” concludes GfK.
And today it stands Publication of another important economic barometer step, a long-ignored stepchild in the market: It is the weekly initial applications for US unemployment benefits. These were neglected for a long time because in the past few years there was almost full employment in the USA. According to the CommerzbankAnalysts are likely to see applications increase to around three million for the week ending March 21, a 10-fold increase over the previous week. This is unlikely to support the stock markets.
So there is a lot to be said that this bear market in this country with all its consequences is likely to continue over a longer period of time. According to the Frankfurt Stock Exchange, the behavioral economist Joachim Goldberg expects only “rallies within the bear market” in the future, ie only interim price gains within a longer-term downward trend.
His reasoning: Both the “bears” that are betting on falling prices and the bulls that expect price gains have not separated from their commitments in the past few days. The profits with their purchased long and short products are apparently not enough for them. So there must be even larger price movements for one side or the other to sell.
Which naturally leads to the question: If the Dax has to fall below 8000 points, so that there are sustainable course gains again?
“Long-term capital inflows would be necessary for the Dax to get out of the worst,” says Goldberg. “And they only come when the conviction prevails that the corona pandemic has survived to some extent.”
Minus 26.23 percent, that’s how much the 30 DAX values have lost in the past 20 days, as of Wednesday. The analysts at Landesbank Helaba calculated this. They best dressed Beiersdorf-Titles with a minus of 5.93 percent from the affair. The biggest loss was in the papers of MTU accept with a minus of 50.17 percent.
Look at other asset classes
New details on European Central Bank (ECB) bond purchase program influence the bond markets significantly. Now many restrictions no longer apply. The ECB can now buy more than a third of a country’s outstanding bonds. There may also be major deviations from the capital key to help countries particularly affected. In the future, bonds with a term of less than 70 days can also be bought.
Italian bonds with a maturity of two years benefited the most, with yields falling to 0.384 percent. At the start of trading this figure was still 0.8 percent, in the past week it was still over two percent. The yield on ten-year Italian bonds fell to 1.49 percent.
The Italian bond rally spread to other peripheral markets such as Portugal and Greece. The respective figures also fell significantly across the board.
In comparison, yields on the European core markets for government bonds such as Germany and France fell only slightly. The value for ten-year German government bonds fell to minus 0.3 percent.
Oil prices are slipping significantly again on Thursday. North Sea Brent dropped 1.3 percent to $ 27.02 a barrel, US WTI even fell 2.3 percent to $ 23.94. The prices of both varieties have already slipped by around 60 percent this year.
Given the rapidly shrinking demand and rising production, the outlook for oil prices remains negative. Estimated global oil demand will decline more than 14 million barrels a day in the second quarter, which should result in unprecedented inventory build-up.
Look at the individual values
Evotec: The shares lose 4.1 percent. The drug developer expects further strong organic growth in 2020. However, it is not yet possible to precisely quantify the effects of the corona crisis.
Deutz: In view of the corona pandemic, the engine manufacturer is suspending its forecast for the current year and shutting down large parts of its production from April 1, initially until April 17. The share declines by around three percent.
SMA: By contrast, the shares of SMA Solar. Despite the corona pandemic, the solar technology group is sticking to its annual forecast and expects an increase in sales and profits.
ABN Amro: Incredible, but true – gamble by a single customer in the United States has brought the Dutch bank a loss of $ 200 million. This will affect the results of the first quarter, said ABN Amro With. The customer had speculated with warrants and futures, the positions are now closed. Because many investors are probably wondering what the security of the trading systems is like, the share falls by 3.8 percent, making it the biggest loser in the European banking index.
Pfeiffer Vacuum: The vacuum pump manufacturer has collected its annual targets because of the corona crisis. According to the Management Board, the forecasts for 2020 with regard to sales growth, unchanged returns and investments in the order of magnitude between 40 and 60 million euros are invalid. He did not name new goals. The share loses 0.8 percent.
Cewe: Because of the uncertainties associated with the pandemic, the photo company has decided not to make a forecast. At the moment, the focus is on online orders and mailing. Nevertheless, the dividend is expected to rise for the eleventh time in a row, to 2.00 euros per share (from 1.95 euros previously). Investors acknowledge this with a plus of 0.5 percent.
Stock exchange expert in New York: “Nobody knows exactly how much the economy will collapse here”
What the chart technique says
Despite the price gains, the chart-technical picture does not yet give the all-clear. The Dax rose to 10,137 points on yesterday’s trading day. As a result, two resistances are gaining in importance: on the one hand, the downward price gap of March 12, which covers the range between 10,138 and 10,391 points; on the other hand the low of December 2018 with 10,279 points, the starting signal for the rally until mid-February 2020.
“This is the decisive hurdle in chart technology, the skipping of which would put the German standard values on a quick recovery path,” say the technical analysts at Düsseldorfer Bank HSBC. Without a recapture, the coming trading days are likely to remain volatile.
Such downward price gaps arise when the daily low of the previous day is above the daily high of the subsequent trading day. The daily low of March 11 was 10,391 points, the high of the following trading day was 10,138 points. Such gaps are a quick re-evaluation of the market and therefore an important resistance according to chart technology.
On the underside, according to the HSBC, the Dax should return to crisis mode at prices below 9070 points.
Here is the page with the DAX course, here is the current tops & flops in the Dax. Current Short sales of investors can be found in our Short sales database.