DAX Market Analysis, November 2020

Last week of October saw a nasty negative impact to the DAX technical picture when Covid-19 concerns on new shutdowns re-emerged in the headlines all over Europe.

Level 12 240 which has previously functioned as a support zone was easily broken and finally resulted in a -8% decline for the month. On monthly chart, exponential moving average 6 (EMA6) is still above EMA12 and thus the long term trend is still up. DAX did however close the month below both averages and this has historically (during last years) been a red flag and a warning sign. Needless to say, volatility has been high and VIX volatility index in USA tested 40 level (during the decline in the beginning of the year, VIX tested 80 levels).

One likely reason behind the significant rise in volatility is the US presidential elections. As we write this (November 3), the polling stations are open and voting is ongoing. On short term, a rise in the volatility is almost granted but volatility might decline fast after the election is over and the importance of who continues as the president is not that important for the markets. Both candidates have their strong and weak political sides, gallups and predictions are clearly rooting for Biden and this has not set the markets into a decline so far. Thus it is challenging to foresee that Biden as the next president is something that the markets would react bearish to.