Good morning traders. The excellent DAX rally continued a strong momentum on Wednesday as investors remain optimistic about a quick economic recovery from lockdown and that’s before we see the ECB expand the ‘pandemic emergency purchase programme’. But also because Germany keeps the spending taps running. Yesterday, the government approved another significant recovery stimulus package of EUR130bn. There is now a VAT reduction, direct payments to families with kids, car sales incentives and support for local governments. That’s on top of the €750bn the ECB printed in March and the €500bn more it will likely announce today. Germany is a strong candidate for surviving the majority of the fallout from the pandemic. It seems the money printing and hopium surrounding a recovery is strong enough to completely ignore the continued violent protests in US cities. But as a trader, I try not to get too caught up with all that and trade what I see. Right now I see excellent momentum and yesterday was another double-digit growth day for me, that’s TWO already this month and we’re only on the 4th! Europe is certainly showing signs that economic activity is slowly recovering.
DAX Analysis
During the last session, we saw the DAX 30 find a session high of 12561 and a session low of 12112 giving us a range of 449 points compared to the average daily range of 273. At the close of play yesterday, we closed at 12519 which was 1492 points above the 200EMA and 1492 points above the 50EMA. The rally on the German stock market will probably take a break today for the time being as traders wait for the European Central Bank’s (ECB) interest rate decision and announcement on further stimulus.
Moving on to the key levels to watch today, watch out for the previous session Point of Control (POC) at 12482 and the previous session VWAP at 12343. The value area high is currently 12560 and the value area low is currently 12280.Here are some more levels to watch out for:
- The 5 EMA (Daily): 12182
- The 8 EMA (Daily): 11985
- The 50 EMA (Daily): 11146
- The 200 EMA (Daily): 11737
DAX Technical Indicators
| Indicator | Value |
|---|---|
| RSI | 85 |
| Stochastic | K: 93 and D: 96 |
| MACD OSMA | 122 |
| Point of Control (POC) | 12482 |
| Value Area High (VAH) | 12560 |
| Value Area Low (VAL) | 12280 |
| The DAX Pivot | 12397 |
| The DAX R2 | 12846 |
| The DAX S2 | 11948 |
News To Watch For
Watch out for the ECB meeting today. It’s likely that we see the ECB expand the Pandemic Emergency Purchase Programme (PEPP) by another EUR500bn (money printer go brrr…) to avoid tightening of financial conditions. And watch for comments regarding the German court ruling on the ‘Public Sector Purchase Program’ (PSPP) and the updated staff forecasts.
We have US initial jobless claims later and perhaps we will see the unemployment claims move lower, which shows the US labour market seems to be stabilising. The ADP numbers suggest a much better NFP tomorrow, but as we know, it is not always the most reliable indicator for non-farm payrolls. Bloomberg’s US consumer confidence and it will be interesting to see signs of a rebound here too.
It seems that Lufthansa will likely be exiting the DAX 30 and perhaps replaced by Deutsche Wohnen. Lufthansa is under heavy pressure because of the hit to air traffic during lockdown.
DAX Trading Strategy & DAX Signals
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