The German Dax 30 index is currently fully valued ripe for a correction. On a DCF valuation, it is 100% fully valued using 3.8% growth and 8.6% discount rate. With interest rates at zero and low inflation, this index is very expensive. The Dax broke through the upper trend line recently, I think this is a bull trap. With American markets heading south, so too will the Dax index. Germany is teetering on recession, the ECB is still trying to pump prime the economy but it isn't working, note the low GDP growth and low interest rates and inflation. The technicals indicate a fall is coming with the RSI, ROC and MACD all pointing down. Trump putting tariffs on German car manufacturers could be a catalyst for the fall to accelerate.
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The DAX is now starting to fall. Bad news from Lufthansa and BASF today and tweets from Trump about the trade war has caused the DAX to fall below the upper trend line. I think the DAX is overvalued in a recessionary environment, it could fall down to 10500. The FTSE100 is also looking wobbly, it is also caught in a bull trap at the moment like the DAX. I think both the DAX and FTSE100 could fall on brexit worries, falling US markets, recessionary environment in Europe, low interest rates and trade war fallout. Could get tariffs on German autos soon, this would tip the auto manufacturers and the DAX downwards.
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Check out the leading economic indicator for Germany, heading south.
www.conference-.../bcicountry.cfm?cid=4
This indicates a possible recession coming for Germany. The LEI is heading south for the UK also.
www.conference-.../bcicountry.cfm?cid=4
This indicates a possible recession coming for Germany. The LEI is heading south for the UK also.
Trade active:
It certainly looks like the DAX poking its head above the trendline was a BULL TRAP. The DAX has turned and is heading down. I think it's going to be 10% lower soon. You could short it still on any strength. I am expecting Wall Street to head lower with the FTSE100 and the DAX. Germany's LEI is heading down big time, I think Germany is the short to play (and the S&P500). Corrections of 10% from here are all possible.
