DAX Index Crawls Back as Autos Lead – Can Bulls Sustain this Rally?

The DAX index is bouncing back today after tumbling by more than 3% yesterday as investors react to the auto registration numbers released today. The index is trading at €12,765, which is higher than yesterday’s low of €12,600.

German automakers like Daimler, Volkswagen, and BMW are the best-performing stocks in the DAX index today. Continental, the leading supplier of tyres has also done well as its stock is up by more than 2%.

The jump in autos is because of the strong auto registration numbers in September. According to the European Society of Vehicle Manufacturers, German auto registrations jumped by 5.6% in September. That pushed the year-on-year increase to 8.4%. The registrations had fallen by 20% in the previous month.

Germany was not the only European country to see improved sales. In the United Kingdom, the sales bounced back by 276% while in France, they rose by 62%.

Robust auto sales is a positive thing for the DAX index because of the weights the automakers have in the index. For one, Volkswagen, Daimler, and BMW are all in the top ten biggest companies by market cap. They are also in the top three when you look at the revenue.

Still, the biggest challenge for the DAX and other German equities is that, as shown below, the number of Covid-19 cases in Germany has continued to rise. The country confirmed more than 6,000 cases yesterday as Angela Merkel toughened travel restrictions.

Germany Covid-19 cases

In addition to autos, other top performing stocks in the index are Delivery Hero, Covestro, and Adidas. On the other hand, the only firms in the red are MunichRe, Deutsche Boerse, Deutsche Telekom, Allianz, and Siemens.

Germany Covid-19 cases have been rising

German DAX technical chart

The German DAX index fell sharply yesterday as the market reacted to the rising Covid-19 cases. It reached a low of €12,600. Today, the index is trying to crawl back, as shown in the four-hour chart below.

The price is significantly below the 25-day moving averages and the rising trendline that is shown in pink. Also, the index seems to be forming a bearish consolidation pattern that is shown in green.

Therefore, I suspect that even with the current bounce, the index will resume the downward trend and possibly retest €12,600. On the flip side, a move above the resistance at €12,900 will invalidate the trend and push the price higher.

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DAX index technical chart

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