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News
Is Amazon a best-buy for the holidays?
News
China stocks end mixed despite PBoC announcement
News
Asia stocks rise on prospects of Fed easing hikes
News
HP joins the tech layoff spree
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Will the euro give the bulls 200 reasons to smile?
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Asset Watch

Should you buy what Frankfurt is selling?

 

Wednesday, November 9, 2022

Despite the Russia-Ukraine war and Germany’s reliance on Russian gas, the DAX Index has outperformed the S&P 500 in 2022. Moreover, with cyclical sectors making up the bulk of the index, its relatively low exposure to technology has been beneficial amid high inflation and rising interest rates.
The DAX achieved a major milestone on Nov. 8, as it closed above its 200-day moving average for the first time since February. And with the metric often a key measure of long-term trends, it’s a win for the bulls.
It also rallied above its declining resistance line (the gray line), and successfully backtested the breakout by dropping below the level intraday on Nov. 3 and then closing above it. As a result, while overbought conditions could elicit a short-term pullback, the technicals in Germany are highly constructive.

Furthermore, the DAX Index is highly correlated with the S&P 500, and with the U.S. midterm elections commencing on Nov. 8, LPL strategists Barry Gilbert and Jeffrey Buchbinder told clients on Nov. 7: “Markets historically have done well in the year after midterms. In fact, they have been higher 18 out of 18 times in the following year dating back to 1950, with nearly identical historical returns under Democratic and Republican presidents.”

 

So if the S&P 500 continues its ascent, the DAX Index should follow suit. But given investors’ mood swings in 2022, it may be wise to exit if the 200-day MA becomes resistance.


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