What a week - the votes in the US congressional election have not yet been counted, but no one in the market has talked about the issue for a long time. Weaker-than-expected inflation data from the US caused a buying panic in the stock markets on Thursday, there was talk of an upward crash.
Thus, Nov. 10 could well go down in the history book as the turning point of a turbulent, partly disastrous stock market year in 2022. In six weeks, the DAX has recovered more than half of the price losses incurred in the previous nine months. The index is now closer to its all-time high than to its low for the year at 11,860 points, which is now no less than 2,200 points away.
What comes after the short squeeze?
However, the value of the price gains made in this brilliant short squeeze will only become clear in the coming week. With the data, many professionals speculating on falling prices were forced to close their positions, which fueled the rally. In the DAX, the fact that the market has clearly improved its technical picture with the jump above the 200-day line and out of the downward trend could now lead to the necessary follow-up buying to maintain the price gains. If this does not happen, for the time being, a correction to the strong resistance zone at around 13,700 points would not be a disaster.
Interest rate hopes overshadow political uncertainty
Looking at the reporting season, which is slowly ending, the good news tends to outweigh the bad. This could, however, also be due to the previously sharply lowered expectations. Moreover, liquidity and, thus, the monetary policy framework are the decisive driving force for the stock market, with corporate profits coming second.
And as far as the looming stalemate in Washington is concerned, Wall Street should be able to live with it, as it has done so often. Uncertainty about the exact outcome is likely to be overshadowed for some time by hopes of a Fed pivot. Besides, election years are good years on the markets, no matter who is in charge in the Capitol.
Bitcoin threatens slide to US$10,000
However, some disruptive fire is coming from the market for cryptocurrencies. Bitcoin & Co. are clearly losing value and, in the past, were often a good indicator for subsequent price losses on the stock market. First, the crypto exchange FTX sent a call for help to its larger competitor Binance, who refused to help after reports of embezzled funds made the rounds.
FTX is now threatened with bankruptcy and many investors with the loss of their capital. This could also hit the stock market with a delay if they are forced to compensate for their losses with other sales. And the mother of all cryptocurrencies, bitcoin, is threatened with a total sell-off below 17,900 US dollars. That is where the last support lies, the low from June of this year. 10,000 dollars would then be the next target on the way down.
Twitter wavers, and Tesla shares fall
The fall in cryptocurrency prices could also be why Tesla (NASDAQ:TSLA) shares have fallen this week to their lowest level since June last year. Elon Musk bought bitcoins worth 1.5 billion US dollars at the time and is now sitting on considerable book losses. But it is more likely to be other reasons why investors are parting with the former stock market star in droves.
Bought for 44 billion dollars yesterday, perhaps already insolvent tomorrow - the chaos at Twitter, the news service taken over by Musk, is almost lost in the current euphoria. Tick marks in, tick marks out; reinstatement after accidental dismissal and now the warning of bankruptcy - the dazzling days of the visionary and billionaire are taking an almost bizarre turn. The image of the "on the side" Tesla boss is tarnished these days, just like the shares of the e-car pioneer. In a competitive market, it could be quite a while before Tesla can polish it up again with positive news.
DAX - current supports and resistances
- Supports: 14,050/13,000 + 13,800/13,750 + 13,650/13,600
- Resistances: 14,250/14,300 + 14,400/14,450 + 14,600/14,650