The DAX index is among the best-performing indices in Europe today. Up by 0.55%, the index has outperformed its peers like FTSE 100 (-0.05%), CAC 40 (0.25%), and Stoxx 50 (0.20%) respectively. The index is trading at €12,250, which is higher than the Friday’s low of €11,954. Most importantly, the DAX index has gained by more than 50% from its March lows even as the fundamentals of the German economy worsen. This makes it the best quarter in decades at the midst of a pandemic.
With the number of coronavirus cases rising in the United States and in some European countries, investors are now focusing on stimulus. In a statement yesterday, Angela Merkel extended an olive branch to the “frugal four” countries that have resisted giving out more than $840 billion as grants. She said this when she met with Emmanuel Macron, the French Prime Minister, two days before she becomes EU president.
By coming president, investors hope that Merkel, who is broadly liked in Europe, will help convince the frugal four countries on the package. These countries have opposed the amount of money being borrowed, the specific amount that will be given out as grants, and the period before countries start paying it back. They argue that giving out free grants without any reform will not benefit the EU economy.
Companies in the DAX index will benefit from the stimulus because most of them do a lot of business in Europe.
Infineon is the best-performing stock in the DAX index. It is up by 0.82% and is followed by Deutsche Post, Deutsche Bank, Deutsche Boerse, and SAP. These firms are up by more than 0.87%.
On the other hand, Bayer is the worst performing stock in the DAX index. It shares have tanked by more than 1.61%. Automobile firms are among the worst-performing in the index today. Daimler, Volkswagen, and BMW have all declined by more than 0.20%. Other worse performers are Heidelbergcement, Allianz, and BASF.
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The DAX index is slightly higher today. It is trading at €12250, which is within the range in which it has been in the past two weeks. In total, the index has gained by almost 50% from its YTD low of €7,965. On the daily chart, the price is still above the 50-day and 100-day exponential moving average. It is also slightly below the 78.6% Fibonacci retracement level and on an upward trend. I expect the index to continue rallying as bulls target the next target at €12,900.
On the flip side, a move below €11,916 will invalidate this prediction. This price is along the lower side of the current island reversal pattern.