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DAX Gains Foothold Above 10,000
So the ECB CAN NOW BUY JUNK BONDS and The Dax seems to have held on to its jump over 10,000 points, for now, and traders are wondering whether the celebrations are happening a little too early.
The coronavirus pandemic made the German DAX fall faster than ever, but it was true for the US indices Dow Jones and S&P 500 as well. From its record highs, the Dax lost 40 percent to its lowest point, which is offering a bargain price. This loss has now curtailed itself to nearer 25 percent.
Those who took advantage of the volatility made more returns in a few weeks than the DAX offered last year. RIP to the many thousands of traders that tried and failed to grab some. Volatility has slowed somewhat and begins to return back to manageable levels, which can make it easier to follow your trading plan and stick to your trading strategy, rather than gamble.
During the last session, we saw the DAX 30 reach a session high of 10586 and a session low of 10095 giving us a range of just 491 points, which is below the average daily range of 519, which is still massively inflated.
ECB CAN NOW BUY JUNK BONDS
European stocks opened lower on Wednesday after European finance ministers failed to reach a consensus on the bloc’s economic response to the coronavirus crisis following 16 hours of discussions. The major sticking point in talks have been corona bonds, common debt instruments pushed by France, Italy, Spain, and six others to help finance massive public spending and stimulus packages amid the crisis.
If the finance ministers cannot agree on a proposal, they might defer the decision to the heads of states who are due to have a conference call tomorrow. However, the finance ministers may give it another try and hence negotiations may continue over the weekend. And, the ECB adopted measures to ease the collateral requirements, meaning that it can accept junk-rated government debt from countries like Greece.
The ECB also reduced the haircuts applied to collateral valuation, making it easier for banks to obtain credit from the central bank. Oh joy. So let’s take a look at the big bank players in the EU. First up, Barclays, good bank, solid, no wait, that’s the UK and not EU. Ok, next up, Credit Swisse, good bank, solid, no wait, that’s switzerland and not EU. Oh dear, next up, Deutsche Bank…. oh… my… god… They are the EU’s biggest player?! Deutsche bank?!
The easing of the rules is temporary and will remain during the pandemic crisis and will be linked to the duration of its new pandemic emergency buying programme, PEPP (that’s cute, they have a little acronym already), scheduled to run until at least the end of the year. The outlook for the banking sector in the EU is not looking good folks, the EU are on the ropes.
What About The US
US retail investors are more confident than ever. Of course they are. US investors remove the ‘sell’ button from their trading platform to make their decisions easier. And with the global economic programs in the trillions (money printer go brrrr), stimulation is expected to translate into further growth.
Although profits are not likely to grow as they would without a corona crisis, they will definitely do better than without economic stimulation. We live in a world of deluded economic theorists in control of a failing fiscal policy, but at least the prospect of cheap stocks will distract traders for the next six months or so, until unemployment and inflation go up at least.
DAX Trading Strategy
Remember, you can get a copy of the DAX trading strategy for yourself. All you need to do is get Sierra Chart installed on your machine. If you need a reminder of how to do that, visit the dax trading strategy page.
To keep up with the economic calendar and the latest price action, click this link to open up the DAX chart.
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