DAX in Mixed Trading as Market Awaits SAP Earnings – China adds to stimulus

The heavyweight tech company will report earning later today, overnight China cuts its key lending rate by 0.25%.

The cloud and software company accounts for 15% of the DAX index, so is likely to set the tone for the market. SAP has outperformed the broader stock index this year and is up 53% thanks to expansion in several markets.

The company, however, has also been facing a probe in the USA over price fixing in government contracts. Investors seem to show little concern about it as the possible fine should fall well short of being anywhere near crippling.

China continued to implement stimulus policies and cut its prime lending rate by 25 basis points. The PBoC also extended its loans for buybacks program. Analysts are concerned that the policy will have a short-term effect only.

The scheme involves 20 Chinese listed companies that have announced plans to tap into the government lending program. The PBoC will supply $42 billion in funding to allow firms to prop up share prices through buybacks.

The announcement has had little effect on the DAX, which previously jumped on the news of the first stimulus package on September 26. The local stock market is more concerned with the overall state of the domestic economy and ECB easing as the DAX continues to look bullish.

Technical View

The day chart above for the DAX shows a market in a bullish trend as price continue to surge above the Ichimoku cloud. The current bullish leg is the 5th wave (crimson zigzag) of the Elliot wave system and would seem to still have some room to trend higher.

The last 2 bullish waves peaked at levels (1 and 3) that failed to show extensive momentum. Those highs reverted to lower with the RSI failing to break above 70, an indication that the bull trend lacks strong momentum.

I see the target to the upside testing the 20,000 level, which is a substantial psychological barrier. While to the downside, the market will find support on the previous high of 19,057 (red line).