Germany's Stocks Capitulate as Decline Triggers DAX Death Cross

September 4, 2015

Berlin (Sept 4)  German equities, which have already lost most of their gains for the year, have now fallen into a bearish chart pattern known as a death cross.

The DAX Index’s 50-day moving average dropped below its 200-day mean for the first time in a year. For technical analysts, that’s a sign that price momentum is fading. The gauge has fallen 18 percent since reaching a record in April, leaving it up only 3.5 percent for the year.

“It’s the market saying we want to see a retest of the August low and touching even a new low,” said Jean-Charles Gand, a senior market strategist at BBSP SAS in Paris. “For now we see a deep correction, but this is a cyclical correction in a long-term trend upwards.”

The DAX tumbled the most in four years in August and briefly entered a bear market as concern grew that its exporters would suffer with a slowing Chinese economy. It had jumped as much as 26 percent this year as the European Central Bank began its quantitative-easing program, triggering a weakening of the euro.

The last time the DAX formed a death cross, the index dropped 12 percent in five weeks to a one-year low. It then surged 44 percent to a peak in April.

Source: Bloomberg


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