Profit-Taking Too Extreme: DAX Plunges – 24,000 Mark Shakes
The expectations of seeing a new record high in the DAX very soon were high. Yesterday, trading was met with a massive dose of disillusionment in the form of heavy profit-taking, which dragged the DAX down, at times pushing it below 24,000 points. Investors had to watch as the gains accumulated from Monday to Wednesday literally melted away within a single trading day.
Once again, the old stock market adage proved true: buy the rumor, and the risk of a slip increases when the event occurs. This happened with the long-awaited breakthrough to resolve the US shutdown: the momentum vanished as soon as the agreement was reached. Market activity is now likely to revert to being driven by routine news. Investors are expected to turn their focus back toward the Federal Reserve to see how it addresses the current economic data, potentially leading to a rate cut decision this year.
Siemens Spin-Off Triggers Sell-Off
The biggest downward driver in the DAX yesterday was Siemens AG, whose shares plummeted by over 9 percent. In addition to its quarterly figures, Siemens announced the spin-off of its medical technology division, which was perceived as a shock by investors and led to massive selling of Siemens securities. Everything carrying the Siemens name was penalized: Siemens Energy and Siemens Healthineers were also severely affected.
Critical Test: Will 24,000 Points Withstand Profit-Taking?
For today, Friday, we must wait to see how the market handles yesterday's dislocations. Will market participants manage to digest the shock and use the pullback as a buying opportunity, or will uncertainty continue to dominate, leading to an expansion of profit-taking? It will be crucial for today's trading how the market manages to defend the 24,000-point mark. A sustained drop below this level would severely cloud the short-term outlook.
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