The latest German economic data still shows that the German economy is experiencing weakness, as:
- The German Consumer Price Index (CPI) for November showed an annual growth of 2.2%, which is lower than the expected 2.3%, but higher than the previous reading of 2.0%.
- The German ZEW Indicator of Economic Sentiment for November declined to a contraction of 91.4, which is lower than the expected -86.0 and the previous reading of -86.9.
- The German ZEW Indicator of Economic Sentiment for the German economy in November showed a growth of 7.4, which is lower than the expected 13.2 and the previous reading of 13.1.
- The Purchasing Managers’ Index (PMI) for November showed a contraction at 43.0 points, which is lower than the expected 43.2, but in line with the previous reading.
- Retail sales on a monthly basis contracted by 1.5%, which is lower than the expected -0.5% and the previous reading of 1.6%.
However, what stands out is that despite this economic contraction and the negative factors surrounding Germany, especially politically, the picture for German stocks is completely opposite. The DAX index continues its upward trend, reaching 19,933 points yesterday, the highest level ever. It has risen by around 17% since the low of August 5, 2024, when it recorded 17,024 points, up to the peak of 19,933 points reached yesterday. It has also risen by about 18% since the beginning of the year, outperforming the French CAC40 index (-4%), the British FTSE100 index (8%), and the European Stoxx 600 index (7%). It closed yesterday at its highest level of 19,933 points, which could indicate the continuation of its upward trend in the coming period, which is surprising and completely contradictory to the economic trend.
It is worth mentioning that there is an important factor that has provided upward momentum for German stocks, which is the decline in the yield on 10-year German government bonds for the eighth consecutive day, where it recorded 2.03% yesterday, the lowest level since October 1, 2024.
It seems that technical indicators may support the DAX index in the upcoming period for several reasons:
- Golden Cross: A convergence between the 20-day moving average (in gray) standing at 19,275 and the 50-day moving average (in blue) standing at 19,291. Any upward crossover between them could signal the continuation of the DAX’s upward trend.
- Relative Strength Index (RSI): Currently stands at around 66 points, indicating positive momentum for the DAX.
- Positive Directional Indicator (DMI+): Currently at around 20 points, compared to the Negative Directional Indicator (DMI-) at around 13 points. We observe a large gap between these two indicators, indicating buying pressure on the DAX index. More importantly, the Average Directional Index (ADX) is at around 34 points, indicating that the momentum of this upward trend is strong.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
