A few days ago, in our post “Achtung Baby”, we warned about Germany as the weak link of Europe as well as the mighty DAX about to “disappoint”. This morning PMI stats out of Europe showed the entire continent continues to struggle, especially Germany. Below chart paints a clear picture.

The DAX falls hard and is down more than 3% from recent highs, a few days ago. Price action is simply horrible. DAX has an important level at 11 500. A possible break below that level should make investors nervous.

Earlier this week we wrote;

Given the fact all global volatilities have crashed, we can´t but wonder how cheap DAX protection has become. Complacency sure, but DAX is flashing not all is well.

Since then things changed quickly. Implied volatility in DAX has exploded to the upside, despite main media still talking about the global volatility implosion. We have seen magnified FX moves this week as well.

For now, the DAX is just a “local European” problem, but it is too big to ignore. Could DAX be the canary in the coalmine nobody dares talking about?19

Source; charts by Bloomberg