Two months ago we published “DAX 30: Time to be Careful Now” to tell investors, who by definition are long-term oriented, that the German benchmark index is approaching the end of the post-2009 uptrend and might soon reverse for a major correction to the south. Traders, on the other hand, are more focused on what the price is doing in the short term. In this respect, it is not enough to know that wave V is nearly over. So, let’s take a look at the rally from 8700, which began in February, 2016, and see what is left of DAX’s fifth wave.
Theoretically, wave V could develop either as a regular five-wave impulse or as an ending diagonal. Judging from the daily chart, the market seems to favor the first option more. As visible, wave V is not over yet and the bulls have more room to run, before they give up. First, we should expect for a new all-time high in wave 5 of (3) very soon. Then, wave (4) should drag the price back to the support area of wave 4 of (3) for a temporary disappointment, before the final wave (5) of V completes the pattern.
To put it more simply, the DAX should make a couple more fifth waves with a pullback in between. In terms of price, 13 500 is there for the taking, but the higher it goes, the more dangerous it gets. According to the bigger picture, the end of wave V would set the stage for a correction back down to the termination level of wave IV near 9000.