Dax continues to rise – Clear signals for a new bear market rally

Düsseldorf On the German stock market, the new week started with significant price gains. At noon, the Dax climbed by one percent to 13,243 points, an increase of almost 125 points.

The Hang Seng China Enterprise Index in Hong Kong is as high as it was in early March. Since the beginning of the year, it has only been down four percent, while the leading German index has lost around 18 percent since then.

Capital market expert Thomas Altmann from the investment house QC Partners evaluates the development in Hong Kong and China as a positive signal for the western stock exchanges. “In the past crises, the stock exchanges in the Middle Kingdom were often a forerunner,” he explains.

The Hang Seng China Enterprise Index had already marked its low during the financial crisis in October 2008, while the Dax continued to fall until March 2009. “Possibly the stock exchanges in China and Hong Kong are also promising a stock market upswing in this country.”

Investment rate has fallen

Investor sentiment is also signaling a new bear market rally, an upward move within an intact downtrend. Because according to the Handelsblatt survey Dax-Sentiment, the fear and panic that prevailed among investors in the previous week led to many sales.

The investment rate fell accordingly. Many investors are now sitting on cash and waiting for buying opportunities again – which speaks for further price gains. Seasonality also supports this thesis. In the stock market month of June there were often new interim lows followed by a recovery lasting several weeks. 2016 and 2019 were such stock market years.

Technical analysis, on the other hand, offers little hope. Because the Dax had slipped back into its downward trend since the beginning of the year after its second bear market rally this year.

According to Martin Utschneider from the private bank Donner & Reuschel, the leading German index would “according to the current status already have to trade above 13,444 in order to leave this short-term downward mode in the long term”. Furthermore, there are signals from the chart technology that the range of fluctuation is likely to increase.

A look at the Dax downward trend since the beginning of 2022 shows that there have been two bear market rallies so far this stock market year. The first from the beginning to the end of March let the Dax climb by around 2500 points. The second from the beginning of May to the beginning of June resulted in an increase of over 1300 points.

Both increases ended at 14,925 and 14,709 points, each below 15,000 points, which is probably the decisive resistance area for an end to the bear market. Should the leading German index overcome this mark, it could also herald a new bull market phase at the same time. It starts with an increase of 20 percent from the low point, in this case at the low for the year of 12,438 points.

When the bear market rally could turn into a trend reversal

So are the gains since last Thursday just a bear market rally? Or is that already the trend change to the upside due to a successful bottom formation?

Investors should remain cautious. After all, none of the major problems weighing on the stock markets have been solved. Neither the current energy crisis in Germany nor the consequences of the Ukraine war. And the zero-Covid strategy in China continues to weigh on the global economy.

There may be some resolution during this bear market rally, which should continue to boost prices. But again: So far that is not in sight.

Look at the individual values

Nordex: A 139 million euro financial injection from the major shareholder Acciona gives the paper a boost. The shares of the wind turbine manufacturer rise by 9.7 percent.

Biontech: Encouraging test results for Biontech’s vaccine adapted to the omicron variant of coronavirus boost stock price. The papers that are based on the US stock exchange rose by 6.2 percent on the German stock market.

Kion: An analyst upgrade lifts the stock significantly higher. The papers of the forklift manufacturer rise by 5.5 percent to around 42.30 euros. Morgan Stanley’s experts upgraded the shares to “overweight” from “equal-weight”, but lowered the price target to 63 from 91 euros.

Jungheinrich: Confirmed medium-term targets encourage investors to get involved. Shares of the forklift maker are up two percent to about $25.00, although analysts at Morgan Stanley lowered the target price to 29 from $45.80. In an interview with the “Börsen-Zeitung”, company boss Lars Broszka sees his company on the right track to achieving the goals for 2025 if the situation improves in 2023.

Verbio: The prospect of keeping biofuel blending in fuel is triggering a relief rally. The shares of the biofuel provider rise by 5.7 percent. According to an insider, the decision by Germany, among others, to stop using biofuel to combat rising food prices has no chance of winning a majority at the G7 summit.

Fresenius Medical Care (FMC): A buy recommendation lifts the paper up. The shares of the dialysis provider rose on Monday by 2.1 percent to around 48.10 euros. Analyst James Vane-Tempest from the investment bank Jefferies upgraded the title to “buy” and raised the price target to 64 from 53 euros.

The recent price slide in response to the US Supreme Court’s ruling on reimbursement for dialysis treatments by rival DaVita was exaggerated.

Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.

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