Bad News Piling Up For Exporters Sends DAX To 200-Day Chart Line
By Roxana Zega
(Bloomberg) — Drama is building in the German stock
market, where the benchmark gauge has spent the better part of a
week flirting with price levels that some say will trigger
bigger declines.
The DAX Index, down 12 percent from its record, dipped
below its 200-day average for the third time in four days on
Monday, something it hadn?t done since January. Now ING Groep NV
is closely watching another key level: Will the measure fall
back to the low reached July 7? It slipped another 0.4 percent
at 10 a.m. in Frankfurt.
?If it breaks, you should expect further weakness,? said
Roelof-Jan Van den Akker, a senior technical analyst at ING in
Amsterdam. ?The risks are obviously on the downside.?
China has supplanted Greece as the chief breeder of anxiety
in a market that does most of its trade outside of Europe with
the Asian nation. Last week?s yuan devaluation triggered the
worst slump for German stocks since April, a drop that continued
on Monday as a U.S. manufacturing report raised concerns over
the strength of the recovery.
Volkswagen AG and BMW AG have tumbled more than 26 percent
since the DAX peak on April 10. The former company already
lowered its annual sales estimate amid a slowdown in China, and
the latter is considering it. BASF SE, down 22 percent from the
high, cut its prediction for the global economy, saying it
expects weaker growth for industrial and chemical production
this year.
Moving Average
Technical analysts study chart patterns to identify trends
moving markets. While the DAX didn?t close below its 200-day
moving average, it ended the day less than 0.1 percent away from
that level.
Still, some bulls remain. Bearish DAX options are near
their cheapest prices since at least 2010 relative to bullish
contracts, indicating that traders see less need for protection.
They?re also adding money to an exchange-traded fund tracking
the shares. The iShares Core DAX UCITS ETF attracted more than
$105 million in the past two weeks, putting it on track for a
fourth month of inflows.
Those who are still betting on German stocks may be doing
so because of a lack of alternatives, according to Peter
Braendle, who manages about $430 million at Zuercher
Kantonalbank in Zurich.
?For Germany as the champion of exports, it?s really
important what?s happening in China, so that?s why I?m not
amazed,? he said. Still, he hasn?t changed his allocation to
German equities and says he doesn?t plan to. ?We have to be
careful. But what are the alternatives to equities? What else
can you do with your money??