While it is a big relief that stocks are bullish again, it is not a surprise. The general trend was set last year, but last week’s pullback confirmed buyer interest in the start of a new bull run by stocks.
Why Stocks Are Performing Again
Stocks have been underperforming recently because of the news regarding the spread of a new variant of COVID-19. Also, the Fed hasn’t given a clear indication of when it will stop providing tapering stimulus for the economy.
While analysts were expecting the Fed to release any news regarding stimulus tapering during the Jackson Hole symposium, there was nothing of such. However, analysts believe it is inevitable for the government to make this announcement. The good news is that the government’s indecision is impacting the stock market positively.
Another positive news regarding the containment of the coronavirus spread is the approval of Pfizer’s coronavirus vaccine by the American FDA. Hence, there should be increased vaccination and reduced cases of the COVID-19 pandemic before it spirals out of hand. However, before the vaccine approval announcement, news from Fed member Kaplan had already started the bullish momentum.
Kaplan revealed that the Fed is critically analyzing data before making any decision. Thus, the Fed’s hawkish stance may be modified based on the levels of infections across the country. Therefore, initiating the rumors that the Fed was about to announce a tapering of stimulus during the Jackson hole symposium.
The DAX 30 And The CAC 40 Performance
The news has positively impacted the DAX 30 (an index for the top 30 highest performing stocks in Germany), which is back on a rally to a new peak following a bad performance last week capped by last Thursday’s worst performance in a while. Since last Friday and until now, it has wiped off last week’s negative sentiment.
Also, there have been lots of bullish activities to ensure its price remains higher than the 20-day and 50-day moving averages. Hence, the DAX 30 has created higher lows, while its crucial resistance ranges between 15,990 and 16,032. However, it is still struggling to maintain the 15,940 range. It can only break this range, provided it can make more gains this week.
DAX 30 chart. Source: IG
Also, the CAC 40 (an index for the top 30 highest performing stocks in France) has been fluctuating around some profit levels. One primary reason for this bounce was the poor performance of the luxury goods and automotive sectors last week. That poor performance resulted from the shortage in supply of semiconductors from China – an essential component in vehicle manufacturing.
Also, the less-than-forecasted economic data had its effect. Hence, if this supply issue remains persistent, the CAC 40 may continue to perform poorly. However, the CAC 40 will remain bullish provided it maintains the 6,200 range. Therefore, bulls can make an entry once this index is higher than 6,850.
CAC 40 chart. Source: IG