DAX
One of the strangest things happened this Monday, showing how stretched financial markets are. Germany’s Dax index, which represents the biggest thirty companies in the country, gapped higher at the opening.
This would not necessarily be a surprise, only that it did so on the country announcing a full lockdown until next year. In other words, nothing moves on the economic front – yet the index trades higher.
One explanation may be the Brexit talks announced to continue. However, the Dax should still be under pressure, especially considering the EURUSD that trades higher too.
Unlike the U.S. stock market, where the higher stock prices are accompanied by a lower USD, in Europe, just the opposite happens – a higher stock market is accompanied by an even higher currency.
Such divergences are normal in December, especially considering the fact that the Fed is about to release its monetary policy decision in two days from now.
The index seems to have formed a double top at 13,500. Anyone believing that the lockdown in Germany may affect the stock market too might want to go short against the highs and target a reward that exceeds twice the risk. This is particularly appealing due to the fact that the index is currently at resistance.
