The DAX has once again failed to breach the barrier at 24,500 points, leaving the critical 24,000-point mark active as a potential trigger for a downward trend reversal. Should the DAX close below this level, it could signal the onset of a more substantial bearish phase.
While optimism persists regarding a potential resolution to the U.S. trade dispute, the deal remains unconfirmed. The costs that Japan has incurred to secure its concessions in Washington are still to be determined, adding an element of uncertainty to the market.
In contrast, investor sentiment on Wall Street is extraordinarily high. Several sentiment indicators suggest that U.S. investors have become extremely greedy and overly optimistic. This is exemplified by a meme stock that traded at just five cents but accounted for an astonishing 15% of the total share trading volume yesterday in New York, despite the absence of any news or catalyst. Such speculative trading behavior often serves as a red flag, indicating that a market correction may be on the horizon.
In the DAX, patience is essential. The index is currently in a neutral zone between 24,000 and 24,500 points. The recent rally and the follow-up pullback hold little significance in the broader context. Investors are now focused on identifying a breakout in either direction, which could establish a new trend.
By Jochen Stanzl, Chief Market Analyst at CMC Markets
