DAX , once again.

DAX jul 2011

Why you should not own the (anymore).

1. You are 500 points away from the upper constraint line and  5000 points above the lower one. This is a 10 to 1 ratio against you.

2. The most probable count is that we are in a flat that ultimately targets about 3000. Even assuming the unlikely event (not seen anywhere else) that we are in a huge triangle the target is still 40% down from here to about 4800.

3. For some reason the DAX is the ONLY index to have performed so well so far. Even the (see below) did not get close.It just narrowly exceeded our expectation of 62%.

EWG jul 2011

4. No other European index did remotely as well as the DAX . Four examples follow;

SMI 2011 CAC 40

italy spain ibex

The Swiss regained just 62% but the CAC40 managed only 40%. Italy did little better and Spain has been slumping again for a year. It is patently not clear how, if all these economies “converge” to some common denominator Germany can keep this performance going. If convergence does not occur the end result might just be a lot worse. Looking at Holland’s AEX, one of the “have” countries together with France and Germany, which is still only at a fraction of its highs makes the whole thing even less tenable.