A closer look at the one-year chart of the two indexes highlights this gap in performance. If the historical trading relationship holds true, then either the DAX will bounce off its lows and catch up to the S&P 500, or the S&P 500 is due for a drop to match the downside performance for the DAX.
Hypothetically, in order for the DAX to trade more in line with the S&P 500, it would need to get back to a level of approximately 9,500, which represents an approximate 6 percent rise from current levels. On the flip side, the S&P 500 would have to trade down to around the 1,750 level if it were to match the current DAX level, which is a drop of around 5 percent.
Maley notes that the DAX currently sits at an important support level in the charts, meaning that a larger move below current levels may lead to accelerated losses. This is why many traders are keeping a close eye on Russia, Ukraine and China as well as market developments in Germany.
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It's worth noting that the S&P 500 is just around 2 percent below its record highs, and even if it were to drop 5 percent from these levels, that would put the pullback at about the same level of the average stock pullback since the depths of the financial crisis.
Of course, if material changes happen to the current situations in Ukraine or China, all bets are off.
While there has been selling pressure on U.S. stocks, some traders note that there isn't a sense of panic selling. They also note that the downside pressure isn't a result of a massive flood of sell orders hitting the market. Rather, it's been a lack of any real buy orders.
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With stocks near record highs, caution is still the prevailing sentiment. However, the trading relationship between German and American stocks is perhaps one reason why some traders are taking some profits just in case the global geopolitical or economic situation takes a turn for the worse.