The strength of the DAX30 demonstrates again a two-speed Europe.

April 12, 2021 15:30

After the euro crisis, triggered by the financial and sovereign debt crisis a decade ago, there was much talk of a “two-speed” Europe. This referred not only to the levels of wealth of member countries, but also to the superior growth rate of the Nordic countries compared to the countries of southern Europe.

With the current crisis caused by the Covid-19 pandemic, these differences are emerging once again in the financial markets. If we focus on the main European stock indices, we can note that indices such as the German DAX30, STOXX50 and the French CAC40, have not only recovered to pre-pandemic levels, but have gone on to record all-time highs. On the other hand, the indices of the southern countries such as the Spanish IBEX35, the Portuguese PSI20 and the Italian FTSE MIB, have yet to reach their pre-pandemic levels.

All these indices have experienced strong rallies from last year’s lows thanks to the improved economic outlook brought by the vaccines and the good macroeconomic data of the last few months, even though the current coronavirus data in Europe is bad. However, these two speeds once again demonstrate the strengths of the different economies, even when currently the coronavirus figures are worse in northern Europe than in the southern countries.

DAX30 Analysis

Without a doubt, the DAX30 is the strongest index in Europe and the German economy is the great engine of the Eurozone. 

During the last few months, the German index has maintained a strong upward trend that increased after breaking the upper band of the green lateral channel, which acted as its main resistance between July and mid-December. Breaking through this resistance level has led the DAX30 to surpass 15,000 points, marking historical highs at 15327.70 points on 6 April after successive supports at its 18-session average.

Currently, its 18-session average and its previous resistance level at the previous all-time highs act as its main support. As long as we do not lose this important level, the long term trend remains bullish. 

At the moment, we can see that the DAX30 is trading with a significant overbought level and that the price is far from its main support levels. Therefore, we cannot rule out that, despite the strength of the trend, the price could make a correction or a sideways movement to get out of this accumulated overbought level.

Depicted: Admirals (Formerly Admiral Markets) MetaTrader 5 - DAX30 Daily Chart. Date Range: 28 November 2019 - 12 April 2021. Date Captured: 12 April 2021. Past performance is not necessarily an indication of future performance.

Price evolution of the last five years:

  • 2020: 3.6%
  • 2019: 25.48%
  • 2018: -18.26%
  • 2017: 12.51%
  • 2016: 6.87%

IBEX35 Analysis

As we mentioned earlier, the Spanish index is not only trading far from its historical highs, but has not even recovered its trading levels prior to the outbreak of the pandemic. At the time of writing, it has only recovered 61.8% of the falls and not without difficulties along the way, as after a strong recovery during the summer of 2020, the index fell sharply almost back to the annual lows, this being the starting point for the current upward trend.

It is true that the Spanish economy has been particularly affected by this crisis due to its dependence on tourism and the political instability generated by the current coalition government, which is why Spanish GDP in 2020 was one of the worst hit internationally. 

If we look at the chart, the uptrend seems clear and the Spanish index may still have upside potential if it manages to consolidate these levels, as the first important resistance can be found at 9,000 points.

Depicted: Admirals MetaTrader 5 - IBEX35 Daily Chart. Date Range: 30 August 2018 - 12 April 2021. Date Captured: 12 April 2021. Past performance is not necessarily an indication of future performance.

Price evolution of the last five years:

  • 2020: -15.45%
  • 2019: 11.82%
  • 2018: -14.97%
  • 2017: 7.40%
  • 2016: -2.01%

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