On May the 13th I did my last post on the DAX30, suggesting that the drop below 6.600 on the day before could indicate the start of an intermediate sell-off.
Today the DAX30 holds ground at 6.340 - I hope you could profit from this 5 % drop during the last fortnight. During the last week we reached a little bit more firm ground. The index holds up above the 200-day-moving-average (MA200), which is currently around 6.200. Several up-days in the last week improved the chart somewhat, but we are still below the other indicators I use: 50-day-moving-average and 15-day and 40-day-exponential-average.
Running through the charts of all 30 member-stocks, none - not a single one - looks like a buy right now. 18 are still above the MA200, but some dropped below that significant support recently (Allianz, Infineon, Dt. Börse). Some have consolidated a little, and might hold ground here or stay just above the MA200 (BASF, Bayer, BMW to name a few). The ones looking most ugly, with little support even on a 5 year chart are Infineon, K+S, Dt. Lufthansa, Metro and maybe ThyssenKrupp.
What's the macro picture? Greece is still in the headlines - we can expect no improvement until the repeat of the elections their mid June. And whatever the outcome: I do not see how it shall get better afterwards. Leading economic indicators are deteriorating. Companies are guiding for much less earnings growth, than analysts are expecting. And the banks in the PIIGS-countries seem to be under pressure again. The EUR went down close to 1.25 vs. the USD.
What will the next weeks bring? Being one of the European politicians, I guess I would feel urged to react rather sooner than later. Allowing another month of bad political gossip from Greece and other countries might kill the markets and some major south-European banks. Some kind of European QE, some action of the ECB (like buying government bonds again), or a European stimulus program initiated by French Hollande and German Merkel --- such action is going to happen more likely than not during the next 4 weeks. Given that, maybe the markets could be propped up a little. Without such action, I guess the DAX30 is doomed to fall further. Once additional companies and the index fall below the MA200 and stays there for 2 or 3 days, only major intervention avoid a 10 % or more drop.
What to do here and now: I am actually not confident enough, that we will see the big drop in order to keep my shorts open or initiate new ones large scale. But I also do not want to sit in cash for the next month totally. Luckily the German Wirtschaftswoche provided me with a nice idea: reverse bonus certificates. The paper suggested would give a 20 % return if the DAX30 stays below 7.700 until 20th of Dec., 2012. This seems to be a nice way to ride out the troubled waters ahead.
Disclosure: I am short OTCPK:DAXXF.
Additional disclosure: I am short the DAX30 and some of its members. I may initiate further short positions or buy above mentioned reverse bonus certificates.