Is the German Stock Market Foreshadowing U.S. Economic Weakness?
The DAX is the 'Dow Jones Industrial Average of Germany.' Have you checked it out lately?
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Every analyst worth their salt knows that the stock market leads the economy. Here in the U.S. and overseas too.
I saw that the German DAX Index was down sharply Thursday morning and it is starting to flash me sell signals.
The DAX is the German blue-chip stock market index that tracks the performance of the 40 largest companies trading on the Frankfurt Stock Exchange. Think of it as the Dow Jones Industrial Average of Germany.
Let's check out a couple charts.
In the weekly Japanese candlestick chart of the DAX continuous futures (a number of futures contracts linked together), prices have been stuck in a sideways move the past few months. Trading volume has been declining the past year. The Bollinger bands have narrowed telling us that volatility has diminished and that condition can sometimes signal a change in trend.
The weekly OBV is positive but the Moving Average Convergence Divergence (MACD) oscillator has been correcting to the downside for several weeks now.
In this weekly Point and Figure chart of the DAX, below, I can see a potential downside price target in the 17,301 area. This might be enough weakness to precipitate a deeper decline.
Bottom-line strategy: Here is a snapshot of some monthly readings on the German economy:
| Current | Previous | |
|---|---|---|
Bankruptcies | 1906.00 | 1802.00 |
Factory Orders MoM | -1.60 | -0.60 percent May 2024 |
Industrial Production | -6.70 | -3.70 percent May 2024 |
Industrial Production MoM | -2.50 | 0.10 percent May 2024 |
Manufacturing Production | -7.00 | -3.40 percent May 2024 |
If the economic engine of Europe is slowing how should that impact stock prices?
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