2023/02/22 (176.039) Technical Analysis

A Dance On The Volcano!
The DAX Future Is Trading Above 15000 Points…

Dax stable – thanks support from the WallStreet

The Dax recovered from its losses in trading on Wednesday and closed with little change. Support came from the US stock exchanges in the afternoon, which also stabilized after a very weak previous day. The Ifo business climate, which brightened somewhat less than expected in Germany in February, had no discernible influence. The leading German index ended the day up 0.01 percent to 15,399.89 points. The MDax for medium-sized stocks, on the other hand, lost 0.88 percent to 28,456.31 points. The Eurozone leading index EuroStoxx 50 fell by 0.18 percent to 4242.88 points and moderate losses were also recorded in Paris and London. In the USA, the most important indices showed minimal gains at the close of the European stock market.

Overall, the Dax is still caught in a very narrow trading range, said market analyst Konstantin Oldenburger from CMC Markets. According to him, the minutes of the most recent meeting of the US Federal Reserve Bank, which are due this Wednesday evening, should not change much because they reflect “news from yesterday”. The January data on US consumer and producer prices and US retail trade were only published after the last Fed meeting, Oldenburger reminded. “And since these all indicated a continued robust US economy and persistent inflation, the mood within the monetary policy committee is likely to have changed – and certainly not for the better.” Among the individual values in the Dax, the shares of Fresenius Medical Care (FMC) and its parent Fresenius took the top and bottom of the index. The reason for this was less the quarterly balance sheets or outlook presented, but rather the statements on the restructuring of the group. The clinic and medical technology group Fresenius wants to remove the dialysis subsidiary from the balance sheet.

Berenberg analyst Lambert called the project “encouraging”. For some players in the market, however, this could not be enough, because they had opted for a reduction in the share of FMC. Fresenius currently holds almost a third of FMC shares. While Fresenius shares lost 4.4 percent, FMC’s jumped 7.3 percent. For the first time in ten years, Telefonica Deutschland achieved a healthy profit from its own resources. For 2023, however, the company expects slower growth. The stocks, which have performed strongly since the beginning of the year, were among the biggest losers in the MDax at minus 1.1 percent. The special pump manufacturer and chip industry supplier Pfeiffer Vacuum, which now owns almost 64 percent of the Busch Group, wants to cut the dividend due to high investments. Shares closed 0.6 percent higher. Evonik and Wacker Chemie benefited from upgrades: Evonik gained 0.3 percent after the new “Overweight” recommendation from the British investment bank Barclays, Wacker Chemie, upgraded to “Overweight” by Morgan Stanley, rose by 5.7 percent as the MDax leader. Above all, the specialty chemicals company Wacker, which is geared towards the solar industry, is seen as a beneficiary of the billions in state support for climate protection in the USA and Europe.

No Dax changes in March – MDax and SDax with changes

After the rise of Commerzbank as a replacement for the industrial gas manufacturer Linde, there should be no more chairs at the next regular index review in March. Rheinmetall would have a good chance of a place in the first stock exchange league, but since there are currently no relegation candidates, the armaments group and automotive supplier will have to be patient. Index experts only expect Deutsche Börse to announce changes below the leading German index on Friday evening, March 3rd. This would then only affect the index of medium-sized companies, the MDax , and the index of smaller companies, the SDax . Any changes will come into effect on Monday 20 March.

Index expert Tom Koula from the investment bank Stifel Europe expects the technology company Jenoptik and the specialist for photovoltaic system technology, SMA Solar, to rise in the MDax in a few weeks. According to him, the biofuel manufacturer Verbio and Software AG are likely to be included in the Sdax. Apart from that, he also doesn’t rule out another change. In view of the strong price losses of the US network equipment supplier Adtran, this could possibly also have to vacate its place in the index of medium-sized companies, which would free up space for the special packaging manufacturer Krones, which is currently still in the Sdax. In addition to these changes of place, a further rise is also expected in the SDax. The insurer Wüstenrot & Württembergische (W&W) is likely to return to the small caps index. According to Koula, the Südzucker subsidiary and bioethanol manufacturer Cropenergies would have to make room for this.
Index changes are particularly important for funds that replicate indices in real terms (physically replicating ETFs). There must then be shifted and reweighted accordingly, which can have an impact on share prices.

Be careful – it can go down faster than up!

Yesterday afternoon, the leading German index again showed relative strength compared to the US indices, which fell very significantly. The sometimes severe price losses – the S&P500 fell by 2 percent – were largely ignored by the German stock market barometer. This was put into perspective this morning – the Dax came under significant selling pressure in the first hour of trading and fell back below the 15,250 mark before stabilizing. A so-called “diamond top” formation can be identified in the 4-hour chart of the index, which has greater downside potential in the short and medium term. However, falling below the support zone of 15,250/300 points in the morning did not (yet) bring any significant follow-up orders on the bottom. However, this can change at any time – as long as the mark of 15,450 points cannot be recaptured by the hourly closing price, the downside risks towards the 15,000 point mark tend to dominate in the short term. Only above 15,450 points did the precarious chart situation ease up a bit for buyers.

Resistance Price Action Areas around 15350 / 15425 / 15475 / 15500 / 15535 / 15560 points
Support Tokens Price Action Areas around 15000 / 15110 / 15245 / 15285 points

In the first hour of trading, the bears set the tone for the DAX, onm this wednesday.
They pushed the index down to the support mark at 15,245 points before the bulls opposed it and initially pushed the leading index back into the 15,300 point range. The buffer to the lower limit of the sideways trend is therefore almost used up. As long as the 15,245 point mark holds, there is a chance of a countermovement up to 15,350/15,425 points. If the DAX® breaches the critical mark, there is a risk of consolidation up to 15,000/15,110 points.

Last But Not Least,
Let`s Get An Overview About The Most Important Economic Data
Which Drives The Dax And/Or The Other European Stock Markets Last Days

Germany Inflation Rate Confirmed at 8.7%
Annual inflation rate in Germany was confirmed at 8.7% in January of 2023, higher than a downwardly revised 8.1% in December, and pushed by a rise in energy prices after the government’s one-off subsidy for energy bills expired in the end of 2022. Cost of energy increased 23.1% and household energy prices 36.5%, namely natural gas (51.7%) and district heating (26%). Prices of firewood, wood pellets and other solid fuels were up 49.6%, and prices of heating oil 30.6%. Electricity cost increased 25.7% despite the electricity price freeze and the abolishment of the EEG surcharge. Cost for motor fuels went up 7%. Meanwhile, food cost surged 20.2%, led by dairy products and eggs (35.8%) edible fats and oils (33.8%) and bread and cereals (22.7%). Compared to the previous month, the CPI surged 1%, reversing a decrease in December. The German statistical office changed the CPI base year to 2020 from 2015.

Germany Business Morale Continues to Improve
The Ifo Business Climate indicator for Germany increased to an eight-month high of 91.1 in February of 2023, from a downwardly revised 90.1 in January, compared to forecasts of 91.2. Expectations for the coming months were significantly less pessimistic (88.5 vs 86.4), while firms’ assessments of their current situation worsened a bit (93.9 vs 94.1). Meanwhile, 45.4% of companies complained about supply chain bottlenecks, less than 48.4% in January and the share of those who want to increase prices has fallen. Across sectors, the business mood in tourism and hospitality has improved markedly while export expectations industry were slightly down. On the economic front, the German economy will not get around a recession, but it will be a mild one, Ifo economist Klaus Wohlrabe said.German Investor Morale Improves for 5th Month
The ZEW Indicator of Economic Sentiment for Germany rose by 11.2 points from a month earlier to +28.1 in February 2023, the highest level in one year and well above market expectations of +22.0. Investor sentiment improved for a fifth consecutive month, helped by higher profit expectations in the energy- and export-oriented sectors as well as the consumer-related parts of the economy. The banking sector’s sentiment indicator reached its highest level since 2004, as expectations for long-term interest rates continued to rise. About 42.1 percent of the surveyed analysts predicted the economic situation to improve in six months’ time, while 43.9 percent of them expected no changes and 14.0 percent expected it to get worse. Meanwhile, the gauge measuring the current economic situation rose 13.5 points to -45.1.

European Stocks Fall on Wednesday
European equity markets closed in the red Wednesday, with the benchmark Stoxx 600 down 0.4% as downbeat earnings reports dragged down mining stocks and banks while media stocks rose. Anglo-Australian mining firm Rio Tinto reported lower profits and said it would more than halve its dividend, pushing miners down by over 2%. Also, banks fell more than 1.5% after the British bank Lloyds reported pre-tax profit of £6.9 billion ($8.4 billion) for 2022, flat on the previous year and in-line with expectations. Domestically, the German DAX closed nearly flat at 15,400 ahead of the minutes of the Federal Reserve’s last meeting later today and after data showed German business morale improved further to an eight-month high, while CPI reports from Germany and France suggested inflation in Europe’s largest economies will remain high for some time. Also, Stellantis added 2.2% after the carmaker said its operating profit grew 17% in the second half of last year on a strong product and pricing mix.