Possible selloff limits for the DAX index: detective work on potential stopping points
DAX Takes a Downturn Amidst Global Market Volatility
The German stock index, DAX, has experienced a significant correction in recent days, with the index trading near its support zone at 12,209/181 as of current market conditions.
The previous resistance levels for the DAX, at 12,434 and 12,520, have now become key support levels. The break below 12,400 points on the DAX has created a strong sell signal, indicating a continuation of the overall downtrend that has been confirmed.
The extension of the DAX price movement from September 16, 2021, to October 12, 2021, has seen a significant increase of 127.2%, from 12,431 to 16,290. However, the index has since retreated, with the highest daily price on September 21, 2021, reaching 12,800, but failing to sustain the upward momentum.
The ifo Business Climate Index in Germany is expected to deteriorate further on Monday, adding to the concerns about the economic outlook in the region. This downturn in the German economy, coupled with the right-wing coalition's victory in the Italian parliamentary election, led by the far-right party Fratelli d'Italia, is weighing on the DAX.
The Fed's 75 basis point hike last week has heavily impacted stock markets worldwide, including the DAX. The current 10-year US Treasury yield stands at 3.75%, while the 2-year Treasury yield is even higher at 4.2%.
The horizontal and potential neckline for the SKS pattern on the DAX is at 12,705. If the index continues to decline and breaks this level, it could indicate a further correction towards the next major support zone at 11,500/400.
Despite these challenges, it's important to note that the DAX is currently trading near its support zone. The pivot point for the DAX is at 12,328, providing a potential area for a short-term bounce if market conditions improve.
The organization that creates the GfK Consumer Climate Index, a key economic indicator in Germany, is the Gesellschaft für Konsumforschung (GfK), together with the Nuremberg Institute for Market Decisions (NIM) since October 2023. They measure and publish the index monthly on behalf of the European Commission.
As always, investors are advised to closely monitor market conditions and make informed decisions based on their own research and financial advisors.
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