DAX Index Is Surging; Here’s Why The Rally Could Be Short-lived

DAX
DAX

The DAX index jumped in the morning session, continuing a rally that started yesterday. The index rose by more than 4%, joining other European equities that rallied today. The FTSE 100, CAC, and the Stoxx index rose by more than 4% too.

The biggest gainers in the index were Adidas, Allianz, BASF, and Bayer, which rose by more than 6%. The worst performers were Vonovia, Beiersdorf, E.ON, and Fresenious, which rose by about 2%.

The current optimism is mostly because the number of Coronavirus cases have started to flatten in Europe. In fact, countries like Germany, Belgium, Spain, and Italy have started talking about easing the current lockdowns. Opening the economy up would lead to more activity in the countries.

Still, the biggest challenge is whether the number of infections will continue to rise after countries ease the preventive measures. Those people with the disease will likely infect others after people start interactions.

Another challenge is on the damage that has already been done. Many companies have been closed meaning that they will not be able to pay their bills. While governments have unleashed significant stimulus, many companies fear that it will not be enough. This could lead to more bankruptcies as we have started to see in the UK. Additionally, there is a challenge about whether the automobile industry will be able to weather the current storm.

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DAX Index Technical Analysis

The DAX index is up to a high of €10,500. As I had written before, this was an important resistance level to watch. On the four-hour chart, this price is along the 100-period moving average and along the 38.2% Fibonacci Retracement level. With the current momentum, I expect the pair to continue rising and attempt to hit the important 50% Fibonacci Retracement level of €11,082.

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