DAX 30 Looking Weak as General Election Looms

Key Talking Points:

• The DAX 30 hits a one-month low as the pullback continues
• German elections could cause some volatility in the next few weeks

The DAX 30, which will become the DAX 40 from the 20th of September, continues to be rejected at the 16,000 mark despite having attempted to consolidate higher momentum around 15,800 for the past few weeks. The index, which is the worst performer so far today, is now resting on its 100-day moving average and is likely to find some support before it reaches the 15,600 mark.

DAX 30 Daily Chart

Both the RSI and the Stochastic are showing signs of further weakness ahead so we may see the DAX 30 pullback to its Fibonacci support (15,424) once again before the next decisive move higher. At this point its hard to really change your thoughts on the general trend in equities being higher as the last few months have served to slowly squeeze out the bears but this pullback does seem to have a little more meaning to it, although I wouldn’t say that out too loud as I’d likely catch my fingers with the next upside reversal likely to come over the next few days.

If by any chance it does work out that momentum is able to turn lower, then I would set my eye on the area between 15,000 and 14,815 as a good target, but this may be a trade with a longer time frame. I’d also keep an eye out for the 200-day SMA as if the uptrend continues it will drift higher and that could possibly raise the area of support going forward.

FEDERAL ELECTIONS

Probably an event to look out for when trading the DAX over the next few weeks is the upcoming national election in Germany, as after 16 years of Merkel there seems to be a wider range of possible outcomes, making it a bit more daunting for traders. That said, the likelihood of a long-lasting impact on the stock market is quite small given how it looks likely that there will need to be a three-way coalition government, which will dilute any extreme policies. But we may still see some volatility around the election (26 September) so it is a good idea to keep an eye on the polls, which are now placing the social democrats ahead of Merkel’s conservative CDU party, which will be led by Armin Laschet.

Learn more about the stock market basics here or download our free trading guides.

— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin