DAX PERFORMANCE-INDEX (.GDAXI) Jumps On Hopes ECB Will Follow Fed
As the dust settles on the Fed’s emergency 50 basis point rate cut the Dax is extending gains. The German index rallied 1% across the previous session and has added a further 1.3% this morning amid growing expectations of ECB stimulus, and despite mixed data.
Retail sales rebound
On the positive side, German retail sales rebounded strongly in January growing 0.9% month on month, a sharp contrast to December’s 2% decline. On a yearly basis, retail sales increased 1.8% in February, up from 1.7% and beating estimates of 1.5%. The data shows that household consumption remains solid and domestic demand is supporting the economy at the start of the year.
PMI points to trouble ahead
German PMI data showed signs of trouble. The IHS Markit service sector PMI fell to 52.5 in February down from 54.2 in the previous month. This was the weakest reading since November, significantly weaker than the 53.5 estimate. Delving deeper into the data, the slowdown was caused by a stalling of new business, with the figures revealing a sharp decline in demand from abroad.
Here we are seeing the clear impact of coronavirus outbreak on foreign demand. China is Germany’s biggest trading partner. Meanwhile, the domestic market is looking stable. However, this could all change very quickly given how fast coronavirus spreads.
ECB to follow in Fed’s footsteps?
Yesterday’s surprise Fed cut is boosting expectations that the ECB will follow suit at the meeting next week. Whilst the ECB clearly has less ammunition that the Fed given how low interest rates already are, expectations of a 10-basis points rate cut are growing. Furthermore, following the G7 meeting yesterday so far just the Fed has acted. The Fed can’t support the global economy by itself, a more united response is expected. However, the ECB clearly want to buy themselves more time given how empty their ammunition cupboard is. A lower interest rate environment is more business friendly hence the jump in equities on the prospect of further easing.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 12,880.40.
The projected upper bound is: 12,601.28.
The projected lower bound is: 11,610.33.
The projected closing price is: 12,105.80.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 29.6428. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 29.19. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 75 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -84. This is not a topping or bottoming area. The last signal was a buy 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 7 period(s) ago.
Rex Takasugi – TD Profile
XETRA DAX PF closed up 142.301 at 12,127.690. Volume was 67% above average (neutral) and Bollinger Bands were 276% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 12,607.27 13,263.03 12,637.07
Volatility: 35 24 19
Volume: 167,038,176 98,120,680 88,180,416
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
XETRA DAX PF is currently 4.0% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume out of .GDAXI (mildly bearish). Our trend forecasting oscillators are currently bearish on .GDAXI and have had this outlook for the last 6 periods. Our momentum oscillator is currently indicating that .GDAXI is currently in an oversold condition.