The RoboMarkets Weekly Review and Outlook – DAX Continues to Cling to the 16,000 Mark – Monetary Policy Course Ahead

Jürgen Molnar, Capital Market Strategist RoboMarkets

09 June 2023

The DAX rumbled along impulsively in the past trading week, without any major movements in one direction or the other. The market is thus once again trapped in its sideways range, which it had left only for a brief excursion to a new all-time high since the beginning of April.

Potential buyers continue to wait for a correction to get into the market more cheaply, while rallies like the previous week are quickly replaced by short-term profit-taking. On the other hand, there is also no willingness to sell on the part of long-term investors, so that the market remains on a good footing on the downside.

Wall Street Gets Attention Back

After the strong outperformance of the DAX over Wall Street in recent months, a catch-up manoeuvre of the indices has now begun in New York, also because on the other side of the Atlantic the stock market still has much more room to rise. However, investors’ focus on Wall Street is also driven by the companies themselves. The reason for this is massive share buybacks. Up to one trillion US dollars are expected to be used for this this year, which is responsible for both the trend and a quarter of the total price gains. The roles are also being reversed. At the beginning of the year, Europe, especially Germany, was the seemingly more attractive market for investors. Now the USA is clearly coming to the fore again.

Investors Are Becoming More Carefree and Greedy

One indicator that currently calls for caution is the “Fear & Greed” index of the news channel CNN. This is currently approaching a state of extreme greed, i.e. excessive optimism on the part of investors. As a so-called contra-indicator, this is not necessarily a guarantee for falling prices, but in combination with the current low volatility it is at least an explosive mixture.

Apple Wants to Know Again

Apple presented its long-awaited virtual reality glasses at the annual developer conference WWDC. Although such glasses are already available from other companies, a product from Apple is likely to attract the attention of the public and thus a large target group. The new Vision Pro VR glasses come with a price tag of 3,500 dollars. As usual, this price puts Apple well above the competition. Whether the company will be able to capitalise on its expensive brand remains to be seen, as this market is likely to be much narrower than that for previous Apple products. However, if the new product is a hit, Apple should soon leave the valuation of three trillion US dollars far behind it on the stock market.

Interest Rate Pause in Washington, a Small Step in Frankfurt

The expected pause in the Fed’s rate hike cycle clearly dwarfs the European Central Bank’s equally expected small upward rate move. Fed Chairman Powell announced in May that he wanted to assess the effects of the historically aggressive tightening by 500 basis points before the next upward step. It is therefore not surprising that nine out of ten economists currently expect the Fed to hold still on Wednesday. On the other hand, since the last meeting in May, strong economic data and statements by some Fed representatives have greatly increased the probability of a continuation of the rate hike cycle as early as July. Depending on how clearly the Fed positions itself on Wednesday, there is a lot of potential for surprise and thus also for movement on the stock market. There is much to suggest that the Dax will finally wake up from its almost lethargic deep sleep.

DAX – Current Supports and Resistances

Supports: 15,950/15,900 + 15,800/15,750 + 15,700/15,650

Resistances: 16,000/16,050 + 16,100/16,150 + 16,250/16,300

This article is from RoboMarkets.