DAX Index Outlook: Expect More Downside As Recession Risks Persist

DAX
DAX

The DAX index declined today, continuing a trend that started in the first quarter when the index declined by more than 28%.

The decline came as Germany is bracing itself for the worst financial crisis since the 2008/9 global recession. In a report on Monday, the German council of advisors said that the country’s GDP could slip by more than 5% this year. The council also warned that a recession in the first quarter will be inevitable since most companies are not performing.

The situation will likely get worse if Coronavirus continues to ravage the economy. Indeed, a fifth of German companies predict that they will file for bankruptcy this year. This is a large number that will lead to millions of job losses. Meanwhile, the Angela Merkel cabinet has approved more than $831 billion to aid companies and individuals. If the epidemic continues, more money will be needed.

Meanwhile, there are questions about the stability of German biggest companies. For example, Volkswagen, its biggest company has reduced work hours of most of its workers. The company could fight for its survival since newer companies are taking market share from it. Deutsche Bank is another company worth noting since it was in a crisis before the Coronavirus epidemic started.

In all, the worst-performing companies in the DAX index in March were MTU Aero, Continental, Volkswagen, and Infineon. For the quarter, the worst performers were Lufthansa, MTU Aero, Daimler, Continental, and Volkswagen.

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DAX Index Technical Analysis

The DAX index dropped to a low of €9,577 in the futures market. Looking at the 4-hour chart, we see that the index has been in consolidation mode in the past two days. In this period, it has found support and resistance at the €9,425 and €10,000 level. In the same period, the index has been forming an ascending triangle pattern.

Additionally, the index is in the fifth phase of the declining Elliot Wave pattern. There is a likelihood that the index will retest last month’s lows this month.

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