Dax Index
The DAX index is down by more than 1.30% as investors react to the ongoing earnings season. The index is trading at €12,630, which is the lowest it has been since July 14 this year. Other indices in Europe are also falling, with the FTSE 100, CAC 40, and Euro Stoxx 40 falling by 0.75%, 0.65%, and 1%, respectively.
This week, the European Central Bank’s supervisory board asked banks in the European Union to avoid paying dividends to their shareholders until at least 2021. That was a hard pill for many investors to swallow considering that many banks are in a relatively stable financial position.
And today, other investors will have to wait for longer before getting a dividend from European companies. When releasing its quarterly earnings, Volkswagen, which is the biggest company in Germany said that it was cutting its dividends as it navigates a difficult phase of its business. This is after the firm reported an operating loss of about $940 million in the first half. It’s vehicle deliveries fell by 27% as most people stopped buying cars in the first half of the year due to quarantines.
As a result, Volkswagen shares are the second-worst performing in the DAX index after Fresenius. They are off by more than 5%. Did you know that Volkswagen is the most indebted company in the world? Google that.
Subsequently, shares of other automakers in the DAX index have dropped as well. Daimler shares declined by 2.4% while BMW shares are down by 2%. Shares of Continental, which is a leading tyre manufacture have fallen by 2.15%.
No company in the DAX index is in the green today. The best-performing is Covestro, whose shares are down by 0.65% and Deutsche Wohnen, whose shares have fallen by 0.35%.
The daily chart of the DAX index does not look good. As you can see below, the index formed a shooting star pattern on July 21. This pattern is usually bearish in nature. Also, the index is facing down at the 78.6% Fibonacci retracement level, which means that bears are “flexing their muscles.”
Therefore, as I wrote a while back, the index was beginning the corrective wave of Elliot Wave pattern. This means that it is likely to continue falling as bears aim for the 61.8% retracement level at the psychological level of 12,000. On the flip side, a move above 13,297 will invalidate this trend.