DAX Index Falls on Italian Fears

The DAX index did open stronger yesterday on the back of developments over the weekend which favoured risk. We saw the Korean leaders holding a summit and there was also an increased possibility of a summit between the US and North Korean leaders happening and this led the stock markets higher during early trading. But what followed was carnage.

DAX Falls

The signs were there on Friday itself when geopolitical issues in Italy began to dominate the market headlines and this had led to the beginning of the sell off in the Italian bond markets. But what followed up on Monday was carnage as the sell continued and it began to snowball. This began to affect the entire Eurozone and the DAX was no exception as we saw a sell off in the DAX as well and the move higher at the market open was easily reversed and instead of seeing the index go through 13000, we saw the index breaking lower.

The selling continued through the course of the day as the index continued to move lower and it fell below the 12800 region at one point of time. It is now indicative that the bears are firmly in control of the index and it is going to take sometime for the index to begin to stabilise in the short term. Rather than trying to find the bottom of the trend, it would be advisable for the traders to wait on the sidelines and see what it is going to do.

Also, looking ahead to the rest of the day, we are likely to see the selling continue in the short term which should carry the DAX lower. We do not see any major support regions as yet and the confusion and the uncertainty in the Italian markets continue and hence we do not see any respite in the selling as yet.