The German DAX index continues to reach record highs, closing at 22,883 points yesterday, its highest level ever. The index has risen by 15% since the beginning of the year, outperforming the CAC40 in France (11%), the FTSE 100 in the UK (7%), and the STOXX600 in Europe (10%). It has also outperformed major U.S. stock indices, such as the S&P 500 (4%) and Nasdaq 100 (5%).
Despite this positive sentiment surrounding German stocks, significant challenges lie ahead for the German economy. One major concern is the upcoming German parliamentary elections on Sunday, February 23, 2025, where competition is intensifying, especially with the rise of the far-right party, Alternative for Germany, which opposes immigration. Additionally, markets are closely monitoring trade tensions between the Trump administration and the European Union, as Trump has threatened to impose tariffs on European imports.
Recent economic data suggests that the German economy is showing signs of improvement, as:
- Factory orders grew by 6.9%, exceeding expectations (1.9%) and the previous reading (-5.4%).
- Exports rose by 2.9%, outperforming forecasts (-0.6%) and the previous figure (2.3%).
- Imports increased by 2.1%, surpassing expectations (1.8%) and the prior reading (-2.7%).
- The ZEW Economic Sentiment Index rose to 26.0, beating expectations (19.9) and the previous reading (10.3).
Additionally, there are expectations that the European Central Bank (ECB) will continue cutting interest rates in the coming months, potentially boosting German stocks further.
Technical Analysis: DAX Continues Its Upward Trend
From a technical perspective, the DAX remains in an uptrend, supported by the following factors:
- The Directional Movement Index (DMI) shows a strong bullish momentum, with the DMI+ at approximately 51 points, while the DMI- is around 12 points. The ADX (Average Directional Index) stands at 41 points, indicating a strong uptrend.
- The moving averages (20-day, 50-day, and 200-day) are in a bullish alignment, with the 20-day moving average above the 50-day, and the 50-day above the 200-day.
- The Relative Strength Index (RSI) currently sits at 80 points, placing it in the overbought zone, which signals strong bullish momentum.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
