The RoboMarkets Weekly Review and Outlook – DAX With Sell Signal – Profit Warnings and Interest Rate Fears Weigh on the Market

23 June 2023

From a technical point of view, the new all-time high last Friday above 16,400 points was initially confirmation of an intact upward trend. Had it not been for the fact that it was reached on a triple witching day of options and futures on indices and shares. Today it is clear: instead of convinced buyers who did not consider the current level to be too high yet, only covering of short positions on the futures market was responsible for this movement. Looking back at the past, the triple witching often provided a turning point in the current stock market trend.

Stock Market Traffic Light Turns Yellow

With the slide of the DAX below the 16,000 mark, the stock market traffic light also jumps to yellow. Many investors are still likely to trust the mode of the past months and also use this setback to enter the market. But there should be fewer and fewer of them before the stock market summer, which tends to be rather weak. And whether they will be enough to compensate for the continuing profit-taking remains to be seen.

Interest Rate Cut Fantasy Finally Goes Out of the Market

Fundamentally, things look anything but encouraging for equity buyers. For weeks, hopes of the first interest rate cuts in the USA at the end of the year carried the stock markets upwards. But now the market has to realise that the Fed will probably resume the rate hike cycle sooner than expected and that it will only refrain from the two further forecast hikes if the data actually indicate a cooling of the economy and inflation.

Fed Chairman Powell has stayed true to his line in his hearings before the US Congress, making it clear once again that this is only a pause and by no means the end of the rate hike cycle. But even if it is, the decisive question for investors should not really be how high interest rates will continue to rise, but rather how long they will remain at this high level. And that period is likely to be much longer than the majority currently believes. Thus, bond and money markets remain a good choice for those who prefer a safe four per cent to the game of fire that many are now playing with US technology stocks.

Profit Warnings Almost Daily

First Sartorius, then Lanxess and finally Siemens Energy – the profit warnings from the companies also determined the mood this week. After Sartorius was able to profit above average from the Corona pandemic, which was also reflected in a tripling of the share price to over 600 euros, normality is now slowly returning to the company’s growth rates. The situation is similar at Lanxess, where the annual target is also in jeopardy due to falling demand.

In Cologne, they are only expecting just under half of the profit estimated at the beginning of the year. And Siemens Energy has a well-known problem, the wind power subsidiary Gamesa. Now the Munich-based company has also cancelled its forecast target for the year. The wind turbine manufacturer’s quality problems are putting pressure on the balance sheet. Gamesa was completely taken over at the beginning of the year, but has so far proved to be a black hole in the balance sheet. The future of Siemens Energy depends more and more on whether it can get a grip on its problem child.

Although the DAX stabilised slightly again at the end of the week, the return above the psychological threshold of 16,000 is likely to be difficult. The index is technically battered, and for the first time this year the signs are pointing to selling. The next important support is now at 15,700 points, and around 1,000 points lower the 200-day line awaits as an indicator of the continuation of the current bull market.

DAX – Current Supports and Resistances

Supports: 15,850/15,800 + 15,700/15,650 + 15,500/15,450

Resistances: 15,900/15,950 + 16,000/16,050 + 16,250/16,300

This article is from RoboMarkets.