Risk event for the week starting 25/09: DAX 40
With the index testing major support, next week's German Ifo business climate, GfK consumer confidence and inflation reading may add more volatility to the mix and determine the next few weeks' trend.
In the upcoming week, IG analyst, Axel Rudolph warns that the DAX 40, the German stock index, could be a risky investment. This is because it is getting close to an important support level from May of this year.
Axel points out that there are some important reports coming out next week that could impact the DAX 40, like the Business Climate Index and inflation data from Germany. Depending on the outcome of these reports, the DAX 40 may break through the support level and experience a big drop.
Downward trend ahead?
If the DAX 40 falls below this week's low at 15,451 and closes below it on a daily chart, Axel believes there could be a sharp sell-off. This could push the index down to around 15,000.
The fact that the DAX 40 is already trading below the 200-day moving average at 15,578 further supports the possibility of a continued downward trend in the future. However, it's important to look at the bigger picture. As long as the DAX 40 stays above the March low at 14,459, the overall trend in the index would still be positive. Even if it breaks through the major support area, it would only mean a potential decline of around 4 or 5%.
To put it simply, Axel is saying that the German stock market is showing signs of being risky. There are some important reports coming out next week that could make the market go down. If the market falls below a certain point, it could keep going down even more. But it's not all bad news, because even if it does go down, it would only be a small drop.
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