DAX Index Outlook: The Plot Thickens for German Stocks

The DAX index plunged to the lowest level since November 2020 amid rising concerns of the German economy. It fell to a low of €12,140, which was about 26% below the highest level this year, meaning that it has moved to a bear market. Other European indices like the FTSE MIB, Stoxx 50, and CAC 40 also continued falling.

DAX best and worst performers

The German DAX index has had a tough performance in 2022 as concerns about the economy continued. One of the biggest concerns is the collapse of the euro. The currency has plunged by more than 15% this year and analysts believe that the situation will continue worsening in the coming months. 

A weak euro is bad for some DAX companies that focus on the domestic market and those that deal with imports. On the other hand, it benefits some companies that make most of their money abroad like Volkswagen and Beiersdorf. 

The DAX 40 index has also crashed because of the ongoing energy crisis in Europe. Germany and other European countries accused Russia of sabotage after the mysterious Nord Stream 1 risks. This means that German companies will have thinner margins this year as energy costs soar.

A closer look at the performance of the DAX index constituents shows that most firms are deeply in the red this year. Zalando share price has plunged by more than 70% this year. It is followed by Vonovia, Puma, Adidas, and Continental AG which have collapsed by more than 50% this year. Other laggards are firms like Siemens Energy, Deutsche Post, and BASF.

Volkswagen’s share price has collapsed by more than 20% this year even as the company prepares to take Porsche public. The only DAX index companies in the green this week are Deutsche Boerse, Beiersdorf, Deutsche Telekom, RWE, Bayer, and Munich Re.

DAX index forecast

The daily chart shows that the DAX index has crashed hard this year. As it dropped, it managed to move below the important support level at €12,389, which was the YTD low. It has dropped below the 25-day and 50-day moving averages.

At the same time, it has moved to the lower side of the Bollinger Bands while the Awesome Oscillator has moved below the neutral level. Therefore, the index will likely continue falling as sellers target the next key level at €12,000. A move above the resistance at €12,389 will invalidate the bearish view.

DAX Index