The DAX has been in a recovery phase for several months, with price action pointing towards a potential move back to its record levels. The current technical framework anticipates either a higher-degree A-B-C pullback into the 23,170 to 24,000 zone before any renewed advance, or a more direct continuation to the upside. Traders are monitoring what is described as a subwave B retracement, with scope for further gains in subwave C once the market fills an identified gap.<\/p>\n\n
The analysis also frames any near-term bounce towards all-time highs as potentially part of a broader wave (B) within an irregular formation, unless the rally extends decisively into fresh records. Attention remains on an unfilled gap dating to the start of April, which is being treated as a key reference point for assessing the risk of a higher-degree correction.<\/p>\n\n
We see the DAX in a clear recovery phase, pushing back towards the 20,000 level after a period of consolidation. This move is supported by Eurozone inflation stabilizing near 2.2% and recent German industrial production figures showing a modest, but positive, 0.5% uptick for May. The immediate question for us is whether this momentum leads to a direct breakout or a more significant pullback first.<\/p>\n\n
Currently, we are tracking a minor pullback which seems to be filling a recent price gap around the 19,350 mark. A strong bounce from here would signal the start of the next upward leg, making short-term call options with an August expiry an attractive way to capture a rally towards all-time highs. This scenario feels plausible as long as the European Central Bank maintains its neutral interest rate stance.<\/p>\n\n
However, we must remain cautious, as a failure to decisively break the old highs could simply be part of a larger, more complex correction. The recent dip in the German IFO Business Climate index to 90.5 shows that underlying business confidence is not entirely solid. A break below key support from early June would have us buying protective puts, as a larger pullback could still test the unfilled gap from early April.<\/p>\n\n
Given these two distinct possibilities, we are not taking an overly aggressive directional stance in the immediate term. Instead, we favor strategies like a straddle or strangle using September expirations, which would profit from a significant move in either direction over the coming weeks. This approach allows us to capitalize on the expected increase in volatility without having to perfectly time the market’s next major move.<\/p>\n\n\n\n