The DAX fell from the 11 July 2025 high in an expanded flat pattern. Wave A ended at 22,943.06 and wave B rose to 25,507.79.
It then dropped in wave C as a five-wave move. Wave ((i)) reached 24,349.54, wave ((ii)) rose to 25,405.97, and wave ((iii)) fell to 22,927.55.
Expanded Flat Decline
Wave ((iv)) rebounded to 24,061.15 before wave ((v)) fell to 21,886.1. This completed wave C of (2), ending the correction.
From 21,886.1 the index turned up in wave (3). A move above 25,507.79 is needed to confirm the advance; otherwise a double correction remains possible.
Within the rise from wave (2), wave (i) reached 23,178.7 and wave (ii) slipped to 22,209.45. Wave (iii) rose to 23,377.65 and wave (iv) fell to 22,677.92.
Another move up is expected to finish wave (v) of ((i)). After that, wave ((ii)) is expected to correct the move from the 23 March 2026 low.
Near Term Trade Setup
In the near term, 21,886.1 is the key pivot. Pullbacks may unfold in 3, 7, or 11 swings.
The significant correction from the July 2025 high appears complete, having established a firm bottom at 21,886.1 on March 23, 2026. This technical turn is supported by improving fundamentals, as the latest German ZEW Economic Sentiment survey just jumped to a 12-month high, suggesting renewed investor confidence. We believe the index is now in the initial phase of a major new upward cycle.
For derivatives traders, the strategy in the coming weeks is to view any pullbacks as buying opportunities for call options or futures. This approach remains valid as long as the critical pivot at 21,886.1 holds. This view is strengthened by the recent cooling of German inflation to 2.1% in March, which reduces pressure on the European Central Bank and supports equity valuations.
In the immediate term, we anticipate one more push higher to complete the first leg up from the March low. Following this, a more noticeable corrective pullback should occur, which would represent another ideal entry point for long positions. The recent drop in the V-DAX volatility index below 15 suggests that market fear is receding, creating a favorable environment for this pattern.
Full confirmation of this new bullish trend will only come with a decisive break above the 25,507.79 resistance level. We have seen historically, such as during the recovery phase in 2023, that clearing a prior major peak is the key signal that unlocks sustained momentum. Without this break, the risk of a more complex sideways correction remains a possibility that traders should manage with protective put options.
