The RoboMarkets Weekly Review and Outlook

Jürgen Molnar, Capital Market Strategist

19 August 2022

German DAX Latest Changes

In the past trading week, everything pointed to the DAX testing the psychological sound barrier of 14,000 points at least once. But then it happened as so often on the stock market: when a large majority expects something, the opposite usually happens. Already below the round mark, the market turned back and initially lost around 300 points before it was able to stabilise for the time being.

For a resumption of the upward trend, the DAX now needs a lot of positive impulses, otherwise, with seasonally weaker trading volumes, there is a threat of a further slide, especially below the technical support at 13,550 points.

Fundamental Analysis

After a surprising double-digit inflation rate in Great Britain in July, inflation concerns first returned to the markets, while the US Federal Reserve made no secret in its meeting minutes that it will stick to its restrictive monetary policy and let another interest rate hike follow in September.

If one wants to read something positive out of this, it is this: The Fed is inclined to possibly take its foot off the monetary brake pedal a little. This means that we will probably not see a third hike of 75 basis points after the summer break, but only half a percentage point.

Perhaps US Federal Reserve Chairman Jerome Powell will show his hand at the annual “Who’s Who” of international monetary policy in Jackson Hole, which starts next Friday. But first he should certainly hope that his forecasts will be a little more accurate this time. After all, exactly one year ago he was still assuming that the incipient surge in inflation would “probably prove to be temporary”.

Not only is he smarter now, but so is the stock market. In the US, a still extremely tight labour market continues to keep inflation at a high level, so the Fed has to tighten monetary policy further to slow down the economy. And it is unlikely to let up in this effort until its inflation target of two per cent comes back into sight, at least in the long term. The numerous purchasing managers’ indices that will be published next week should provide information about the mood not only in the US economy, but also in the European economies.

The extent to which the looming energy crisis is affecting trading on the stock markets could be seen in the figures of Germany’s problem child of the energy market, Uniper. The company, which is now supported by the state, presented a loss of more than 12 billion euros for the first half of the year. But even worse was the fact that there was not even a glimmer of hope for better times in the figures or in the outlook.

Should We Invest in Uniper?

The dependence on Russia and the associated uncertainty for the future are too strong. Uniper thus remains a hot speculation and only suitable for investors with a very strong penchant for risk.

DAX Price Forecast

Billionaire Ray Dalio is now speculating less on falling prices of European shares. In his hedge fund Bridgewater, he has lowered all German positions below the reporting threshold of 0.5 percent, so that they are now no longer traceable to the public.

On the one hand, this is good for the German stock market, as there is less selling pressure on the shares. On the other hand, the fact that the market is currently developing better than expected by many professionals could be responsible for this. Thus, there could well be price potential if others join Dalio’s slight change in sentiment.

DAX – Current Supports and Resistances

Supports: 13,450 + 13,350/13,000 + 13,150/13,050

Resistances: 13,820/13,780 + 14,000/13,950 + 14,200/14,150

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