German equities find themselves in a fine balance at the moment, with the earnings calls of some giants helping, but energy concerns hanging over the market. The ECB is due for an announcement on Thursday as well.
DAX
The German index initially fell a bit during the early part of the trading session on Wednesday but has rallied as we await the ECB decision on Thursday.
That being said, yields are relatively flat. You can see that both in the United States and Germany, they are a little higher during the day. The DAX will be paying attention to the Federal Reserve guidance coming up, but more importantly, the ECB.
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ECB on Thursday. What will they say?
The question is now whether or not the ECB starts to sound hawkish. After all, there are inflationary concerns, but it is energy-related inflation, and that is a sticky situation. There are concerns about energy supply heading into the winter. That is something that must be addressed as well.
SAP recently had an earnings call that ended up being rather strong, with 26% year-over-year expansion in profits, and that is a major driver of the DAX. We will also have to pay attention to the automotive sector.
But as things stand right now, it looks like we are in the middle of consolidation. We are trying to break out, and it remains a buy-the-dip scenario. The 200-day EMA, near the €25,100 level, continues to offer support. The psychologically important 25,000 level continues to offer support as well.
So, I do like this market on dips or on an expansion above €25,750. I have no interest whatsoever in shorting the DAX. I do think it will be one of the better performers by the time it is all said and done. I am bullish of Germany, barring some kind of energy crisis.
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