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Global Outlook

DAX of Germany, is basically finalizing an acceptable C wave down.  That is the good news.  The bad news is that it is now over-extending the v-th wave of the C wave that can potentially result into a spiral meltdown toward the 5100 area.  For now, DAX is at 5434 and is supposed to make a lower low on Monday probably into the daily 200ma support at 5402.  That will be good news if DAX can use the 200ma support since it will become a higher low and investors love buying rallies coming off higher lows.

I forgot the ticker symbol for Shanghai.  I used the Szenshen instead:

Szenshen is an excellent candidate for swing traders but since FXI follows the Hangseng index more than the mainland indexes; very hard to trade using FXI since the Hangseng index has more likely completed a 1-2-3-4-5 rally on the weekly chart same as EWP of Spain and are now suffering the first stages of multi-month if not a multi-year correction.  The brightest candles burn the fastest, and so they say.  Here is Spain (good for trend traders who wanted to go short scalps or daytrades):

Kospi of Korea is still an unknown;  it has a potential truncated 5th last March 2009;  so it is a candidate to be able to reach the last high of May 2008 without suffering a deep correction.

Hangseng also has a potential truncated 5th down on the monthly chart.  It is still well above 18,609 which is the level by which the validity of the truncated 5th will be put into question.

Taiwan is also a shooting star on the weekly chart.  A much better performer than Szenshen, EWP, or Hangseng.  Another bright and shining candle running out of wax?  Below 6976 and Taiwan Weighted Index should start going thru a prolonged correction.  Until then, Taiwan is still a buy with extreme caution.  Not suitable for the faint of heart.

Japan or Nikkei 225 is the one I am stalking since December.  It was able to form an acceptable 1-2-3-4-5.  A weak rally as compared to practically the whole world, but a completed rally nevertheless.  Who knows if Nikkei was able to already complete it's multi-decade "supercycle" correction.  Nikkei has gone down deep enough it should not be required to correct for 40+ years or much more.  Either pay the fine or serve the time;  Nikkei did both from 1989 to 2009 to correct the searingly hot rally from post-war Japan to 1989.

Sensex of India is a conumdrum;  but since the structure of Sensex at the top of the daily chart is practically identical to that of DAX, SnP500, Indu, and Compq;  it is a good candidate for swing trade using the US ETF EPI.  But I would rather trade SPY than EPI. 

It is good to know that 5 of the largest stock market indexes in the world have identical patterns at the top of the daily charts.  Meaning, a 5th wave rally on the weekly chart is still missing or far from being over at this stage.

Russia RSX has already completed a 1st wave up.  More likely it is forming a running correction 2nd wave.  Brazil will need a lot more time to study than what I can spare right now.  More likely a 4th wave has just completed from the March 2009 start count.  But then EWZ ETF of Brazil must rally now for the 5th or else.

For the broad index SnP500;  this is the weekly chart repeated here:


US, Germany, China, India, Korea, and Russia, among others, are still not in danger of potentially making a prolonged correction at this stage.  Basically, they are much more capable of running a 5th wave rally than going into an immediate multi-week meltdown.

Also, OIL which is the leading indicator for the global economy had been doing a wide trading range on the daily chart that is far from being bearish.

This is Australia weekly chart;  another leading indicator:

But of course, I can be wrong.  So use stop loss provisions for a potential 5th wave rally swing trade. 

Investing right now is not practical specially with Szenshen potentially forming a triangle on the daily chart.   A triangle is most often found in 4th waves or the iv-th wave of a 3rd-wave.  Sooner or later,  China will have to make a prolonged multi-year correction if the triangle scenario at the top of the weekly chart turned out to be true, which at the present stage is the highest probability scenario. 

A few bad apples (Dubai, Greece, Spain, Portugal) does not mean the whole cart is already rotten.  The good ones can still be sold at higher prices since they look so shiny and yummy.  And there are less to sell by throwing the bad ones.

With  investors fleeing the Euro$, most of the expensive commodities such as gold, silver, copper, etc,, and those countries now in trouble;  there are potentially more money now available looking for stable countries to invest - at least for a 5th wave rally, technically speaking.