Dear traders, dear stock market friends.
The DAX continued its correction in the last trading week and ended the week with a moderate loss of 0.7%. After the German benchmark index last rose to a new all-time high at the beginning of June, the correction came as little surprise, especially as there has been some uncertainty on the stock markets in recent days due to the military conflict between Israel and Iran and the possible involvement of the USA. As far as the economic outlook and the technical chart picture are concerned, however, the outlook remains positive.
Economic expectations brighten significantly
While the upward trend in the DAX took a breather, the early economic indicators from Germany came as a positive surprise. The ZEW index jumped to 47.5 points in June - the highest value since spring 2021 and almost twice as high as in May. At the same time, the Munich-based ifo Institute reported a positive outlook in its summer forecast and now expects moderate GDP growth of around 0.4 % in 2025, driven by catch-up effects in investments and continued solid foreign demand.
Inflation & monetary policy: "Close to the target - but data-dependent"
Another factor that gave the DAX a tailwind this year was the continuing disinflationary trend in combination with interest rate cuts by the ECB. Consumer prices rose by only 2.1 % YOY in May. Falling energy prices depressed the basket of goods for the third month in a row. Bundesbank President Joachim Nagel thus sees the ECB as "close to its mandate" and describes the current monetary policy as neutral - however, he emphasized last week that there is no prospect of interest rate cuts until the autumn at the earliest.
Fiscal policy: relief for corporate profits
In addition to the monetary policy framework, national tax and investment policy will become particularly important in 2025, as it has a direct impact on companies' available cash flow.
On June 5, 2025, the Bundestag passed a tax relief package worth around 46 billion euros, the measures of which will gradually take effect between 2025 and 2029. The key points are:
- The reintroduction of declining balance depreciation (AfA): For newly acquired movable assets, companies are allowed to take up to 25 % or 2.5 times the straight-line depreciation on the respective remaining book value. This "front-loading effect" shifts the tax expense to the early years of use and thus strengthens liquidity in the short term.
- In addition, the federal government is lowering the corporation tax rate (federal share) by one percentage point to % 14; trade tax remains unaffected, which means that the combined burden will amount to around % 29-30 in future, depending on the assessment rate. In addition, the loss carryforward will be extended indefinitely and the loss carryback to three years. According to the Ministry of Finance, this will result in an average net profit leverage of around five percentage points per year, particularly for investment-intensive sectors such as mechanical engineering and vehicle construction.
Pullback to previous all-time high
As you can see on the following weekly chart, the correction in the DAX over the last two weeks has been exactly at the horizontal support zone at the price level of the previous all-time highs on a weekly closing price basis at around 23,000 points.
The DAX initially reacted with a bullish bounce and was able to defend the support. However, the correction has so far only been moderate and has not even reached the weekly EMA-20 (purple EMA in the weekly chart above).
On the daily chart below you can see that the horizontal support zone is reinforced by the daily EMA 50 and the daily SMA 50. However, an extension of the correction would also fit very well into the technical picture and would not change the overriding upward trend. If the 23,000-point mark does not hold, the next important support level would be around 22,400 - 22,600 points. On the one hand, there is horizontal support here and, on the other, the volume by price (or volume profile) indicator shows that this is an important price zone where increased trading volumes have been observed in the past.
Short-term downward trend
It is of course impossible to predict whether the correction in the DAX has already ended or whether it will continue. One possible strategy would therefore be a staggered entry into the ongoing correction.
Another alternative would be to wait until the correction has clearly ended. Again, it is not possible to determine exactly what is clear. However, a proven strategy is to analyze the subordinate trend. The long-term primary uptrend is intact. The current correction of this primary uptrend is nothing more than a secondary downtrend, which you can look at on a smaller timeframe such as an hourly chart.
On the following hourly chart of the DAX futures (FDAX) you can clearly see the secondary downtrend. On the one hand, the sequence of falling highs and falling lows; on the other hand, the EMAs on the hourly chart also signal a downward trend.
As soon as this secondary downtrend has been reversed - i.e. as soon as a clear secondary uptrend is recognizable again - the correction would be over from a technical market perspective and the new secondary uptrend would represent a new movement phase of the primary uptrend.
Author Tobias Schmid
Date: 23.06.2025
