DAX Extends Gains On US Stimulus Package Hopes

Whilst the US are clearly late to the stimulus party, they certainly know how to make an entrance. European stocks are pointing to a second straight session of gains on Tuesday as traders cheer US Senators finally agreeing a $2 trillion stimulus deal. The deal, expected to be voted on today, will provide economic relief to American taxpayers and businesses hit by the coronavirus pandemic. Unprecedented times call for unprecedented measures. This is set to be the largest congressional bailout in history.

To put some perspective on the size of the deal, at $2 trillion it dwarfs the $800 billion Obama stimulus that passed 5 months after the financial crash – it would appear that some lessons have been learnt. This move is combined with the Fed’s moves of slashing rates to almost 0% and unlimited bond buying, creating a package which is doing some heavy lifting work in the markets.

Stocks indices surged in the previous session on the whiff of an agreement, with the Dax posting 11% gains. The risk on sentiment is boosting stocks again in early trade on Wednesday. The question is whether the rally can continue?

Is the tide turning?
We still need to see an improvement in coronavirus numbers and a peaking in cases in US before the rally really takes off. Until then we can expect to see relief rally days but also days when the data is just plain scary and the market sells off. Fast forward 2 months from here and we expect to see some phenomenal buying opportunities.

German sentiment data up next
The focus will now shift to German IFO Survey for March. The sentiment data is not expected to be pretty, as business confidence collapses; the very measures that governments are implementing to protect the public from the killer virus results in demand for goods and services evaporating. The preliminary reading last week showed a big decline to 87.7 from 96, the revised number could show another drop.

Levels to watch
The Dax has jumped 1.8% on the open and is trading at 9910. On the 4 hour chart, it broke above its 50 sma yesterday and has made an attempt on 100 sma at 9971. A move above tis level could see more bulls jump in.
Immediate resistance can be seen at 9971 (100 sma) prior to 9995 (today’s high so far) prior to 10965 (high 11th March).
Support can be seen at 9541 (today’s low) prior to 8870 (50 sma) and 7970 (low 19th March).

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