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DAX: A Technical Turning Point

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Elliott Wave Charting

DAX: A Technical Turning Point

The German DAX has been bullish over the past four weeks, after lows around 1.5380 were established. A decline from 6100 can be counted as a clear five wave move, which in Elliott Wave technique is called an impulse wave.

When an impulse wave appears against the previous trend, after the major top or bottom was established, (6100 in our case), the whole structure suggests that a new trend is forming, or that at least huge correction is in process.

The correction can be structured at minimum by three waves, and therefore, at least one powerful push lower while the market trades below 6100 top is expected. We can count only waves 1/A and 2/B, so a lower wave 3/C still needs to follow. 

The market seems to be trading in wave 2/B, against the trend of the previous wave 1/A decline; that indicates that wave 2/B is a corrective wave. Corrective waves usually retrace 61.8% of the previous distance in a three wave, A-B-C move.

A move lower is expected so long as the 6100 top holds.

The momentum indicators also allude to a turning point in the mid-term; the stochastic is overbought and has already crossed, and any move below the 80% line will confirm our Short expectations, while the RSI juggles with overbought conditions.

The interesting aspect is in the volume reads, which were increasing when the DAX traded short (wave 1/A), and has been decreasing since the corrective wave 2/B got underway.

The volume is quite low right now, and indicates a potential exhaustion move that shows that the DAX may be headed lower again in the same structure as seen in a blue wave 1/A, if global risk markets lose buyers.

TheLFB Charting: DAX 4h view

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