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The price destruction in the DAX after the June contract halted shows exactly where the journey might go: DOWN
The real numbers that we will see for 2nd quarter very soon show how much bad companies, reckless liquidity management as well as very bad management of large companies in sense of production places versus supply management show strong pressure on stocks and indexes.
Another view on the players is very dull. Because we see many DAX companies that are involved in betrayal, some working within grey zones and the biggest that survive just because the government support them any time with tax payer money.
I list here 8 of the largest DAX members that are in this light:
Bayer, BMW, Daimler, Deutsche Bank, RWE, VW, Wirecard plus the recently delisted Lufthansa.
How can 8 out of 30 companies be supported nonstop by the state, by the banks or are constantly in trouble with the law - making money? Or everything together like VW as the black sheep?
Answer - it is the game of management fees, paid by everyone be it stock holders, tax payers or investors. Just as long the company survives - and then the responsible people evaporate...
8 out of 30 - means one fourth - and prices for the stock rise still? This is very weak base and will lead to instant drops in the index. When the volume gets lower during summer some extensive volatility is ahead. This can drive the stocks in any direction - some strange moves included.
The sideways curving around 20400 of the DAX was annoying. Then came triple witch day with a wider up before futures expired and in the afternoon a silent slip down.
Taking a look into the chart of the full future from morning to evening where we can watching the price nearing the resistance 1 (R1) until expiry to get down to Pivot Point and then to support 1 (S1).
The goal was reached to stabilize the price between 12300 and 12400.
Now the first semester is nearly over. Watching things for second half year will be interesting.
A weekend with lots of business news in Germany:
• DAX member wirecard (WID) admitted to haven't found the 1.9 billion EUR in the 2019 balance. EY did not give the ok for the final numbers. This missing money is about the owners capital or 25% of the yearly turnover. With this in hand the company that makes shop money transfers possible in many countries of Europe and officially lifted business in Asia, the company might go into insolvency. Because the numbers of 2018 and 2017 (checked by KPMG) might be false as well...
• Lufthansa will have a busy week ahead: The general assembly to be held on Thursday will be a problem for the larger stockholders as they do not want to accept the package of money given by Germany and getting the rights to get direct insight in the company. The second negative point is that Lufthansa is delisted from today in the main DAX. It is now listed in the MDAX.
DAX will start around 200 points lower than Friday low which was seen on closing.
9:00 start @ 12203
9:30 gap down closed
IB range 121 points
IB 9:00 to 9:30 made a range of 125 points. Up!
Taking a trade today
DAX short 10:00 to 13:30
entry @ 12550
exit @ 12550 (SL)
result 0 points
GFIs1
Breaking: Ex-Wirecard CEO has been arrested -> Wirecard was the hope company in the DAX and is searching for 1.9 billion EUR missing! Price for the stock came down 88% since the announcement of EY not signing the final papers for holding the general assembly that was planned for June. Fraud alert - 2 top managers fired.
DAX short 9:30 to 17:00 (prolonged)
entry @ 12431
exit @ 12184
result 247 points
GFIs1
edit 11:00 ifo numbers came out 10:00 and were good: best jump up in history... but
in the days of Corona those numbers are worth nothing! as we can see (edit 11:15):
the price halted a moment to rush down more
The move down was very transparent - even best IFO numbers had no influence.
Price runs further negative even after cash hours.
A support is to find @ 11977
As of the trade the entry was perfect (looking at the rules) - the exit as well.
Of course the trade runs down more which is ok.
One of the best trades anyway.
So nothing to include
Yesterday's move down in the DAX despite "good" numbers of the IFO was hefty. Some consolidating today probable. This is not the day for a trade: we are in the Monday Wednesday Friday pattern.
Looking forward on tomorrow for the next - hopefully good one trade.
DAX member wirecard (WID) has announced insolvency
The stock had been halted for 60* minutes at a price of € 10.74.
It is not sure if the 29 daughters of the holding will need to get the same procedure.
A new member for the DAX is needed - Lufhansa had left the DAX last Monday and
changed into MDAX.