DAX Germany Weekly Chart; ECB Stealth-Tapered in April and No One Noticed

An interesting market event occurred in March-April that no one is talking about. At the end of last year, European Central Bank President Mario Draghi said he would lower the monthly asset purchase program, quantitative easing, to 60 billion euros from 80 billion euros per month in March-April. The European and global stock indexes were accustomed to the 80 billion euros per month QE program and a drop to 60 billion euros of monthly purchases is a taper.

However, Draghi pounded his fist on the table from December of last year into April of this year that the move to the lower part of the 60 to 80 billion euro QE range does not constitute a taper. At every ECB meeting through the meeting last week on Thursday, 7/20/17, Super Mario stands with his index finger pointed skyward proclaiming that there has been no discussion by members, zero, nada, zilch, over the tapering of QE. Last week, Draghi did hint that the discussion about tapering QE in the future would begin in the autumn which sent the euro catapulting higher above 1.16.

But back to the critical March-April time frame. Global investors have become Pavlov's dog since the central bankers are the market. Traders are trained to buy stocks as long as the easy money flows like water. Draghi forced his will onto traders that had accepted the line from the ECB since last December that the move from 80 billion euros to 60 billion euros ($70 billion) in QE in April was not a taper. However, the chart above says it was a taper (blue circle).

The European charts are all the same. Once the ECB began its stealth tapering in April lowering its asset purchases (less easy money) to 60 billion euros per month, the major stock indexes are moving sideways with a downward bias ever since. Germany is the economic powerhouse across the pond. The DAX has petered out for the last month after the negative divergence spankdown (red lines).

The indicators are weak and bleak with lower lows so even if a bounce occurs in price in the weekly time frame, the DAX will likely want to come back down a gain for lower lows say one week out. Isn't it interesting that everyone is wondering when the ECB will taper when they already stealth-tapered the QE program starting in April. It is obvious that the central bankers are the market and as seen in the chart above, once the easy money slows, stocks stall.

The purple lines show a C&H pattern with a breakout line at 10750. The base of the cup is at 9000 which is a difference of 1750 so the upside target would be 12500 which was tagged satisfying the cup and handle. Humorously, those purple lines are very funky and suggestive and can serve as a Rorschach test that Sigmund Freud would cheer.

The top may be in for European stocks unless Draghi starts printing more easy money again. This will be difficult since he said the ECB will begin discuss tapering (purchasing less than 60 billion euros per month of assets) in the autumn. The chart says the ECB tapering has already begun as of April. The euro has trended upwards since April from 1.06 further verifying that the reduction in QE purchases that began in April is perceived as a tapering of the ECB's quantitative easing program whether Draghi calls it that or not. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.