DAX

DAX Index Consolidation Accelerates as the Earning Season Continues

The DAX index is down for the second straight day today as investors react to the ongoing corporate earnings and the rising tensions between the US and China. The index is trading at €12,585, which is below this week’s high of €12,805.

The DAX index is not the only major index in the red today. In Europe, the CAC 40 and Stoxx 50 are down by 0.10% and 0.05%, respectively. In the US, futures tied to the Dow Jones and the Nasdaq 100 have declined by more than 0.10%.

The biggest driver for the decline is the rising tensions between China and the US. In a statement overnight, the Trump administration requested all American firms to stop doing any business with Tik Tok, the giant social media company.

The administration is also working to get rid of some of the biggest Chinese apps in app stores. Also, it is working to delist some Chinese firms that are listed in American exchanges.

The major risk is that China may respond by asking its firms to stop partnering with American social media companies. While social media firms like Facebook and Google have minimal presence in China, Chinese companies spend a lot of money in them.

The DAX index is also reacting to the latest earnings from German firms. This week, among the notable DAX index constituents that have released their earnings are Adidas, Linde, Siemens, Deutsche Telekom, and Deutsche Post.

Most companies in the DAX are in the red today, with Muench Rueckvers, MTU Aero, and Continental being the worst-performing. The leaders are Deutsche Telekom, Siemens, and Deutsche Wohnen.

DAX Index technical outlook

The daily chart below shows that the DAX index has been in an upward trend after falling to €7,980 in March. The index recovered and reached a high of €13,305 on July 21. Since then, the upward trend has faded, pulling the index down to the current €12,585.

On the daily chart, the price remains above the 50-day and 100-day exponential moving averages. It is also along the 78.6% Fibonacci retracement level. This retracement connects the highest and lowest level this year.

It is also above the ascending trend line that connects the lowest levels in April, May, and July. Therefore, I suspect that the upward trend will continue so long as the price remains above this trend line at €12,500. 

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