Frankfurt Markets Edge Toward DAX Record Amid Mixed Sentiment and Geopolitical Jitters

The DAX index (^GDAXI) opened cautiously on May 8, 2025, hovering near its all-time high of 23,578.40, but lingering geopolitical risks and mixed corporate earnings underscored investor hesitancy. While the index remains within striking distance of its record, technical overbought conditions and institutional skepticism are creating a precarious balance between bullish momentum and bearish caution.

A Volatile Start to the Week

The DAX began the day at 20,039.69, fluctuating between a high of 20,468.43 and a low of 19,884.48, before closing at 20,280.26—a notable decline from its previous close of 23,249.65 on May 6. Trading volume surged to 137.3 million shares, signaling heightened market activity. Despite this volatility, the index’s proximity to its March 2025 peak has kept optimism alive, though traders remain wary of a potential correction.

Technical Indicators: Overbought, but Bulls Still in Charge

Technical analysis reveals a market teetering on a knife’s edge. The DAX’s RSI (72.42) and stochastic oscillator (98.97) signal extreme overbought conditions, raising concerns about a near-term pullback. However, moving averages (e.g., the 5-day MA at 22,497) and the MACD (96.21) suggest upward momentum remains intact. A hanging man candlestick formed on May 6 adds a bearish undertone, but analysts argue this could merely indicate consolidation rather than a definitive reversal.

Key support and resistance levels are critical:
- Immediate Support: 23,212 and 28,900
- Critical Support: 22,405 (a potential bearish trigger)
- Resistance: 23,750, 24,000, and 24,250

Corporate Earnings: A Tale of Two Markets

The DAX’s performance is being pulled in two directions by divergent corporate results:
- Bullish Drivers:
- Deutsche Bank rose 2.7% after reporting a 39% jump in Q1 net profit to €1.78 billion.
- HelloFresh surged over 10% on a tripling of adjusted EBITDA to €58.1 million.
- Rheinmetall climbed nearly 6% on strong Q1 sales.
- Bearish Pressures:
- Porsche fell over 6% after slashing its 2025 revenue forecast to €37–38 billion.
- Lufthansa dropped 2.7% as its net loss widened to €885 million.
- Adidas, despite a 155% profit surge, withheld annual forecasts due to tariff uncertainties.

These mixed signals highlight sector-specific risks, with automotive and industrial stocks facing headwinds while consumer and financial sectors shine.

Geopolitical and Macroeconomic Crosscurrents

Investors are navigating a minefield of geopolitical and macroeconomic risks:
- Trade Tensions: U.S.-China trade talks in Switzerland offer hope for tariff relief, but markets remain skeptical until concrete agreements are reached.
- India-Pakistan Conflict: Military clashes have spooked global markets, though their direct economic impact on Germany remains limited.
- Federal Reserve Watch: The Fed’s pending rate decision looms large. A neutral stance could stabilize equities, but hawkish signals might amplify volatility.

Sentiment Divide: Bulls vs. Bears

The Börse Frankfurt Sentiment Index for institutional investors fell sharply to -8 points (from +14 the prior week), with 40% of professionals adopting bearish positions—up 12 percentage points. Concerns about the DAX’s “too-fast” 26% rally since April 7 have triggered profit-taking. Meanwhile, private investors remain bullish, with their sentiment index holding steady at +23 points (52% bullish vs. 29% bearish).

Conclusion: Record or Retreat?

The DAX’s path forward hinges on resolving three critical uncertainties:
1. Technical Overhang: Overbought conditions demand a correction, but bulls argue the index’s long-term trend remains upward.
2. Geopolitical Outcomes: A U.S.-China trade deal or de-escalation in South Asia could unlock upside, while further tensions could trigger a selloff.
3. Fed Policy: A neutral stance would likely stabilize markets, but any hawkish surprise could reverse momentum.

With German factory orders surging 3.6% in March and the consumer confidence index improving to -20.6, domestic fundamentals remain robust. However, the hanging man candlestick and institutional skepticism suggest caution. If the DAX dips below 22,405, bears may seize control. Conversely, a close above 23,750 could propel it to new records.

For now, the DAX’s record remains in sight—but investors must weigh the allure of fresh highs against the risks of a well-earned breather.