DAX Index Fundamental Analysis – week of March 26, 2018

It turned out to be a terrible week for the bulls in the DAX index as the index did not even get a chance to move higher than the close from the previous week and all that was seen was a major sell off. This sell off gathered momentum as the week wore on and ultimately, it ended the week near the lows of its range.

DAX Crashes

We have been saying over the last few week of how the DAX has been caught in a large range and that it was unlikely to the index to break higher at any point of time in the medium term. The index has been under pressure ever since the ECB indicated that they were looking to taper the QE and end it as soon as they can and with this leading to the buy side drying up ultimately, we were pretty sure that any major move was most likely to be in the downward direction. That turned out to be true last week.

The latest move lower was mainly due to the news that the US had imposed new tariffs on the import of Chinese goods. Following the release of the news, the Chinese also imposed tariffs on US goods in a tit for tat move though the tariffs were to a much lesser extent than what the US had done. The Euro leaders also expressed concern over such moves but said that they would also retaliate if they were faced with such a move. This led to a lot of fear and uncertainty as the investors began to pull their funds out of the stock market as they began to look for safe havens in such a risk environment. Also, there was no short term solution in sight and this led to a worldwide sell off in the stock markets which pushed the DAX through the 12000 region and it closed the week in the 11700 region.

Looking ahead to the coming week, we would expect this news to continue to dominate the headlines of the market for the short term and this should keep the index under pressure during this period. The index is not at the lows of its range which should provide some support in the short term but the risk and the fear that we are seeing now are likely to be highly overpowering which puts the support under real danger.