The past trading week was interesting from a technical point of view: It was an “inside week”, the high and low points remained within the range of the week before. And the high of this “inside week” of 14,131 points is identical to the previous record high at the beginning of January. Prices above this mark should quickly lead to a record high of 14,169 points.
The German benchmark index is trading just two percent below its all-time high, which should actually trigger a cheer in view of the significant price gains in the past weeks and months.
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But the opposite is the case: investors are extremely pessimistic; hardly anyone dares to buy stocks. According to sentiment analysis, this behavior is a contra-indicator and thus an indication of a rather rising share price. For Stephan Heibel, who evaluates the Handelsblatt survey, there is currently a “situation in which it takes courage to enter at the current price level.” But this courage could be rewarded.
Rising US bond market yields
The greatest threat to the stock markets is currently the development of the world’s most important bond market: the US government bond market. Today, Monday, the yield on a ten-year bond climbed to 1.38 percent, the highest value in a year.
The reason for this rise in interest rates is on the one hand the general economic recovery after the corona low and on the other hand the expectation of rapidly increasing inflation.
Should the US Federal Reserve abruptly end its expansive bid price, it could become uncomfortable on the stock markets. Investors shouldn’t forget that.
And there is much to suggest that the rate of return will continue to rise, presumably up to 1.50 percent initially. This level has always been a major turning point in ten-year US bonds over the past few years.
However, higher values are currently not considered likely. Because the current benchmark for the US Federal Reserve is not interest rates, but unemployment. With a recent rate of 6.3 percent and even increasing initial jobless claims, the USA is far from its goal of full employment.
The danger behind rising yields: Investors fear a new so-called “taper tantrum”, as in May 2013. At that time, Fed Chairman Ben Bernanke announced that he would be reducing bond purchases. As a result, bond prices collapsed and yields soared. This triggered a kind of shock wave on the global financial markets, which led to severe price distortions, especially in the emerging countries.
The faults were short-lived. In retrospect, these price losses were an ideal entry point.
The Dax rose again by 25 percent by the end of 2013. Because there was more than a year between the end of the bond purchase program and the first rate hike by the Fed.
Of course, this scenario will not repeat itself so exactly. Because in 2013 there was a higher interest rate level in the USA. In April 2013, the return was 1.67 percent and rose to around three percent by the end of 2013.
The German benchmark index rose by around twelve percent in the same period.
The yield on German government bonds is also increasing significantly. In the ten-year range, this value has climbed from minus 0.600 percent to currently minus 0.292 percent since the beginning of January.
The yield difference between ten- and two-year Bunds has reached the highest level in almost a year. Such a high yield differential, however, signals a significant economic recovery.
View of the Varta share
The analysts at Berenberg Bank downgraded the battery manufacturer’s shares to “Hold” from “Buy” and lowered the price target to 130 from 145 euros. On Friday they went off the market at 131.30 euros.
The y fell to their lowest level in more than two months and were at the end of the Dax.
Traders attributed the price losses to a report in the Wall Street Journal, among other things. Accordingly, more and more restaurants in the USA are trying to bypass the food delivery services such as DoorDash, Uber Eats and Grubhub and their high fees.
The y are supported by the local authorities, some of which have already introduced upper limits for the fees.
Bitcoin is slipping
The oldest and most important cyber currency hit a record high of $ 58,354 on the Bitstamp trading platform on Sunday. On Friday, according to data provider Coinmarketcap, all Bitcoin in circulation were worth more than a trillion dollars for the first time.
What the Dax chart technology says
In addition to the “inside week”, where the high and low point remained within the range of the previous week, the German benchmark index also hangs between two price gaps: Last Wednesday, a small downward price gap was torn compared to the prices on Tuesday, between 14,050 points and 14,036 meters there was no listing during regular trading hours. This gap is now considered the first resistance if the Dax should rise again above the 14,000 point mark.
The opposite applies to downward price gaps.
The support, which is even more important from a chart technical point of view, is just below that with 13,500 meters. This mark formed resistance for months last year that was not overcome until December. That is why the resistance has turned into support.
The leading index only fell below this once at the close of trading this year.
Here you go to the page with the Dax course, here you can find the current tops & flops in the Dax.
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rising yields shouldnt trigger crash