DAX Index Daily Fundamental Forecast – July 19, 2017

We had been warning that this would happen and yesterday, it did eventually happen. We had been saying that despite the fact that the DAX had broken back above the crucial 12550 region and was trading well above it for a week or so, we did not feel very confident about the move and that it has to be taken with a pinch of salt. What it meant was that the index was always under the risk of a quick fall and it happened yesterday.

DAX Falls on Weak Data

The talk of tapering from the ECB is likely to continue to loom over the markets over the next few weeks atleast. Though it might take some time for the tapering to actually happen, the markets always tend to over react or overrun situations and this is what we are seeing now. With the talk of tapering around, the European stock markets are bound to be under pressure and with the DAX being one of the biggest of them all, it is likely to be a prime target for selling.

The selling is happening as the tapering would mean that the ECB would no longer push in gigantic funds into the markets and that would mean that the stock prices are likely to fall. So, the investors and the traders want to overrun that and hence they want to dump their holdings now so that they dont get caught out when the ECB does start pulling out after summer. This was the reason for the fall yesterday as the index broke back below 12550 during the course of the day and trades below 12500 and continues to look weak.

The ZEW economic data from Germany also came out to be weak and this was just the trigger that the market needed to sell off. There are no economic events from Germany scheduled to be released today and so we can expect some consolidation below the 12550 region for today.