- The DAX German index rose significantly during the trading session on Tuesday as the world celebrated the idea that the Australians were stepping back from the expected rate cut.
- They only raise 25 basis points, so somehow that has changed all of the concerns in the European Union, at least for the moment.
- This will end up being a nice selling opportunity, because the situation in Europe has not changed, nor is it going to get any better anytime soon.
When Will the ECB Start to Loose Its Monetary Policy?
A lot of this comes down to the idea that all central banks do the exact same thing, and therefore it’s only a matter of time before the ECB starts loosening monetary policy, and perhaps even the Federal Reserve. The problem with this theory is that it’s grounded in delusion, and not facts. The Federal Reserve has to deal with inflation, and if the Federal Reserve is fighting inflation, that tightens monetary supply around the world, not just the United States. After all, the US dollar as the world’s reserve currency and it has an effect on everything.
In the short term yes, we have seen a significant “risk on rally”, but I don’t think that is going to last for very long. Quite frankly, this is a market that has to deal with a lack of energy, a war on its doorsteps, and an overall downtrend. This relief rally will almost certainly be sold into, it’s just a matter of when. All we need is some type of bad news or catalyst to get things moving, and the next thing you know we have the DAX falling again.
Keep in mind that the Germans have already stated that natural gas consumption needs to come down by about 20% this winter to get through it, and that’s not exactly going to be conducive for a high-growth environment this winter. As long as that’s the case, I just don’t see how you can make a viable argument for this index to go higher of the longer term. Furthermore, it is highly susceptible to pressures and failures coming from external markets, as it is so heavily export laden. In other words, there’s nothing good out there to drive the DAX higher, and I think it’s probably only a matter time before we start falling again. I’m looking for signs of exhaustion to start shorting.
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