DAX Under Pressure: Fear in the Market – Conservative Fed Dampens Rally Hopes
The German stock index is starting the new trading week under pressure once again. Last week, all accumulated gains were wiped out on Thursday and Friday due to profit-taking, as there were no follow-up buyers. The leading index closed with a loss of 0.69 percent at 23,876.55 points, settling below the 24,000 mark again. The euphoria for new record highs that emerged mid-week was nipped in the bud, meaning the mood of investors and traders at the start of the week is likely to be defined by caution.
Extreme Fear: Fed Expectations Shrink – What Does This Mean for the DAX?
A key reason for the general restraint lies in the readjustment of expectations toward the Federal Reserve. The Fed appears to be far more conservative than the market initially assumed. According to the Fed Watch Tool, the market is now pricing in only about a 43 percent probability of another rate cut this year.
These dampened prospects lead to less optimism. Another key sentiment indicator, the Fear & Greed Index, is currently registering in the area of "Extreme Fear." Market participants are aggressively hedging, signaling a significant increase in puts in the market.
DAX at the Threshold: Does Negative Sentiment Offer Buying Opportunities?
The technical chart analysis shows an extremely negative sentiment in the DAX—almost too negative. This signals that the market could indeed be on the verge of another reversal towards a positive direction. Anti-cyclical traders may find optimal entry opportunities in the coming days. What remains is the uncertainty among investors, who have been thoroughly shaken up in recent weeks. However, the index's slowdown just before the weekly close offers hope that a positive start to the trading week can be found again.
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