The RoboMarkets Weekly Review and Outlook – DAX at All-time High – Restrictive Central Banks Cannot Stop the Rally

Jürgen Molnar, Capital Market Strategist RoboMarkets

16 June 2023

While Wall Street was still in a deep sleep in the first months of the year, the DAX, which was running away during this time, now seems to want to wait until the indices in New York have caught up again.

Double Top Looms in the DAX

However, the patient waiting of the DAX at record levels also carries the risk that somewhere above 16,300 points the lid will be put on it at some point and that it will initially head back down from this double top. In the past, the triple witching day, of which the June expiration was on Friday, have often provided such a turning point. The rally in New York in particular raises the question of how much it was driven by the players who had to unwind their short positions as prices continued to rise and their losses increased.

The Alternative Bond Market Beckons

So it could well be that after the long weekend in New York, prices will start to fall, also because, as described above, the monetary policy environment in particular does not yet represent a really attractive environment for long-term equity buyers. It should not be forgotten that the bond market is currently attracting yields that are no longer far below the rate of inflation, thus eroding capital. Many investors are likely to turn to the attractive alternative of the bond market precisely when the gains made on the stock market in recent months begin to crumble.

Investors Are Greedy and Professionals Almost Fully Invested

The “Fear and Greed” index of the news channel CNN now stands at “Extreme Greed” at 78 out of a possible 100 points. The air on the stock market could therefore be much thinner than the current mood suggests. Another clue that the party may soon be over can be seen in the level of investment by large investors.

US fund managers have ramped up their investments significantly in recent weeks. The ratio has risen from 54 to 90 percent. The professionals are thus almost fully invested, which inevitably raises the question of who can and will still buy. The investment ratios are thus currently as high as they were last at the start of the Ukraine war.

The Tesla Share Rises and Rises

The Tesla share is also currently on a run. A look at the chart is more than impressive and shows a plus of 130 percent since January. The share price is thus rapidly approaching its highs, but caution is advised. A year ago, the company’s economic situation was much better. This year, Tesla has already had to significantly lower the prices of its cars several times in order to remain attractive on the market. A business practice that is rarely rewarded on the stock market with rising prices.

Shortened Trading Week in New York

In the USA, Monday is once again a holiday and the stock markets remain closed. While the DAX will have to start the coming week without its big lead wolf Wall Street, the cards could be reshuffled in New York on Tuesday after the triple witching day. Also because the calendar is otherwise rather sparsely filled except for the Bank of England’s interest rate decision, investors have enough time and space to process the monetary policy decisions of the past week and draw conclusions for their positioning.

DAX – Current Supports and Resistances

Supports: 16,200/16,150 + 16,050/16,000 + 15,900/15,850

Resistances: 16,300/16,350 + 16,500/16,550 + 16,650/16,700

This article is from RoboMarkets.