DAX 40: BETWEEN HISTORICAL GROWTH STRENGTH (299.89%) AND A MODERATION STRATEGY IN A CURRENT CORRECTIONAL CONTEXT

 

The DAX, or Deutscher Aktienindex, es the main German stock market index that tracks the performance of the 40 largest and most liquid companies listed on the Frankfurt Stock Exchange. It is weighted by market capitalization adjusted for free float, with data from Xetra and continuous updates, including after the close, via futures. Created in 1987 with a base of 1,000 and published since 1988 at 1,163.52 points, it represents Germany's diversified economy.

The DAX is the German stock market index. Importance and Volatility

Monitoring the DAX is key due to its role as a barometer of the largest European economy, reflecting sectors such as automotive (Volkswagen, BMW), chemical (BASF), and industrial (Siemens), with high liquidity and diversification that mitigate individual risks. Its volatility, high in 2025 (+52.5% YTD at 12.49% over 10 days due to inflation, ECB policy, and geopolitics), but below historical peaks (100.8%), requires strategies such as sector rotation and derivatives to exploit trading ranges.

Origin of Changes

The movements arise from macroeconomic factors such as ECB policies (interest rate hikes), persistent inflation, geopolitical tensions (Ukraine), and global economic cycles, amplified by dominant weightings in exporters sensitive to China and the US. Internal changes include annual reviews of Composition (top 45 by liquidity) and sectoral events such as the green transition in the automotive industry.

Reasons to Invest

Investing in the DAX via ETFs or futures offers European diversification, high liquidity for quick entries/exits, and exposure to German export growth, with historically superior returns in post-crisis recovery. It reduces country risk by encompassing resilient blue-chip stocks, ideal for medium- to long-term portfolios.

Time Forecasts

Short term (Dec. 2025-Jan. 2026): moderate rise to 24,448-24,825 points (+3.6-5.2%), with volatility due to ECB data; medium term (2026): growth to 30,403 points (+28.9%), driven by cyclical sectors; long term (2027+): bullish projection to 36,911 (+56.5%), assuming macroeconomic stability, although with downside risks if there is a recession. The first chart shows the performance of the DAX index from January 4, 2010, to December 12, 2025. The chart indicates a growth of 299.89% over the period, rising from approximately 6,048.30 to 24,186.49 points. This is a historically high and remarkable performance.

The second chart ("GROWTH") shows the trend lines: linear trend (simple regression). The equation of the trend line is y = 3.5587x + 4,994.9, with a coefficient of determination R² = 0.8530. An R² of 0.8530 is very high for time-series financial data and suggests that time is a very significant factor in explaining the stock market's movement.

Polynomial trends (3rd and 6th order) allow for a better fit to fluctuations. The table shows very high correlations: the 3rd order polynomial correlation is 96.43%, and the 6th order polynomial correlation is 97.79%.

The high correlation of the polynomial trends (close to 98%) indicates that the DAX's historical movement has followed a well-defined pattern that can be accurately modeled by these functions. This suggests that the market has a strong memory of upward trends.

The standard deviation is high (4,420.90), indicating high volatility in the index's prices over the period.

The index has had a range of variation of 18,153.65 points, highlighting the large difference between the minimum (6,048.30) and maximum (24,186.49) values.

The mean (12,100.51) > median (11,847.16) > mode (8,335.56). This relationship and the positive skewness value indicate a positively skewed distribution. This means that the "tail" of the distribution extends to the right (high values). There is a greater concentration of data at lower values ​​and a frequency of occasional spikes (very high values) that "pull" the mean above the median.

This is typical in stock markets, where large upward movements may be less frequent but have a significant impact on the long-term average.

Kurtosis measures the "peakedness" of a variable's distribution compared to the normal distribution (Gaussian bell curve), which has a kurtosis of 3 (or 0 in some software) as appears to be the case here, using Kurtosis = Pearson's kurtosis−3).

A negative kurtosis (−0.136) indicates a platykurtic distribution (flatter than normal). This means that the distribution has fewer data points at the extremes (thinner tails) and fewer data points in the center (a flatter peak).

In risk analysis, investors generally look for distributions with thin tails (low/negative kurtosis, or platykurtic) because this implies a lower probability of extreme events (so-called fat tails), i.e., massive drops or spikes. Lower kurtosis suggests that the risk of catastrophic movements or "black swans" is lower than would be expected with a normal distribution.

The histogram corroborates the conclusions regarding the shape of the distribution, showing a higher concentration of frequencies in the lower intervals (9,072.33–11,807.23 and 11,807.23–13,972.33). The frequencies decrease markedly as the values ​​increase, confirming the positive skewness (the tail extends to the right).

The overall shape does not perfectly fit the Gaussian bell curve (the normal distribution is symmetrical), which is expected.

The statistical and econometric analysis provides the following key information for decision-making: the DAX index has shown exceptional growth, and the trend correlation (close to 98%) suggests that this pattern is firmly established. The short- and medium-term forecasts are also positive.

Although volatility is high (standard deviation), the negative kurtosis is a positive sign, as it suggests that the risk of catastrophic events is lower than it might appear under the normal distribution model.

The current value is 24,186.49. The 50- and 360-day forecasts (around 18,500 and 19,400, respectively) are lower than the current value.

The fact that the current value (24,186.49) is significantly higher than the 50- and 360-day forecasts (around 18,500 and 19,400, respectively) suggests overvaluation or a temporary spike at the time of the analysis. Trend models generally smooth out and do not capture extreme spikes.

From a long-term trend analysis perspective, investing in the DAX is attractive due to its historical growth and strong correlation.

However, from the perspective of current timing, caution is key. The index is trading well above short- and medium-term forecast values, which historically can indicate an imminent correction.

For a long-term investor, the investment remains viable, but it is advisable to wait for a correction or pullback that brings the price closer to forecast values ​​(or even lower) to reduce the risk of entering at a peak.

For a short-term investor, volatility is high, and the risk of a correction from the current level is significant. It is not the ideal time for immediate investment. Based on the indicators and moving averages, which suggest a strong short-term downtrend, this justifies the cautious stance you mentioned.

The MACD (Moving Average Divergence/Convergence), with a value of -37.33 and the "Sell" signal, indicates that the short-term moving average is below the long-term moving average, a classic sign of negative momentum and a downward trend.

The ADX (Average Directional Index): A value of 54.862 is very high (generally above 50), and given the selling context, this implies that the current (bearish) trend is very strong and well-established.

The RSI (Relative Strength Index): The value of 42.484 with the "Sell" signal is below the 50 level, confirming that selling pressure is greater than buying pressure.

Signals indicating caution or overbought conditions, such as the Stochastic Oscillator and Williams %R, both show "overbought" with extreme values ​​(99.164 and -0.842). While overbought conditions generally precede a sell-off (which is consistent with the current trend), in a market with such strong selling sentiment, these extreme values ​​may signal that the recent downward move has been very rapid and could be nearing a pause or temporary upward correction.

The Average True Range (ATR) is key in indicating "lower volatility." This means that recent price movements have been smaller. In the context of a strong downtrend, this could suggest that the trend's strength is waning (a pause is imminent) or that the price is consolidating before a potential new strong move (possibly to the downside, given the dominance of sell signals).

The vast majority of moving averages indicate a sell signal, both in their simple (SMA) and exponential (EMA) versions. This is the clearest sign of the current downtrend, as recent prices are consistently below the short- and medium-term averages.

The long-term moving averages (MA100, MA200) show a mix of three "Buy" signals and one "Sell" signal. The fact that the MA200 (SMA and EMA) indicates a "Buy" signal (meaning the current closing price is above the MA200) suggests that, despite the current downward correction, the overall very long-term trend (the "big picture") could still be bullish. This adds a moderating element to the analysis.

Given that the latest close (24,087.33) is slightly above the Classic Pivot Point (24,081.44) but below the open (24,176.32), the price is trading in the previous resistance/current support area. Support S1 is located at 24,049.06. A drop below this level would confirm selling pressure for the day. Resistance R1 is located at 24,131.81. A move above this level could alleviate short-term selling pressure.

The overwhelming majority of indicators (MACD, ADX, RSI, MA5, MA10, MA20) point to a strong and well-established downtrend ("Heavy Selling").

The cumulative probability of 99.69% and the one-year change of 18.52% suggest that the asset is a "good stock" with a long-term positive historical performance. The 200-day moving average (MA200) in "Buy" support the view that the current correction is just a pullback within a broader main trend that remains bullish.

The overbought STOCH and Williams %R indicators, along with low volatility (ATR), suggest that this short-term sell-off may be overextended and nearing a turning point or bounce (upward correction).

A cautious approach is the most appropriate recommendation. The market is at a technical crossroads.

For a short-term investor (trader), maintain a sell or hold position. Consider taking profits if it approaches support levels such as S2 (23,998.69). The extreme oversold signal on the oscillators could be a "dead cat bounce" opportunity (a temporary rise), but the main short-term trend is bearish.

For a long-term investor, the current situation presents a potential entry opportunity to accumulate, as the stock is in a correction/discount phase within a broader historical uptrend (supported by the 200-day moving average and yearly return). Place a staggered buy order at the lower support levels (S1, S2, or S3) to mitigate the risk of a further drop.