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DAX: A Textbook Bearish Pattern

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Nov 28 2017

Good day traders.
Recently we have seen some negative correlation between US and EU markets. We can see S&P50 moving sharply higher while DAX came under pressure this month and fall aggressively since start of November. On the chart below we can see that Nikkei, DAX and FTSE100 are all trading lower, while S&P500 is the only one trading at the high. This is not what you want to see in “risk-on” environment since it can mean an upcoming a reversal.



Technically speaking, I think that other three indexes suggests that sooner or later US markets will also turn lower for a pullback. The reason comes from a clear and textbook pattern on German DAX, which shows an Elliott Wave cycle in action. It’s a five wave pattern up since late August that peaked on November 07, after that aggressive fall down to 12900. It was a strong impulse reaction, labeled as wave A. Well, when it comes to trading you want to trade in the direction of impulses, which means that now it should be to the downside, same but opposite to what we have seen in that uptrend since September when each slow price move (blue circles) represented a correction. So if we respect what market is doing, then price may do the same thing this time, but to the downside as current slow price move around 13000 also looks like a correction, ideally wave B. Despite that, we also know that from an Elliott Wave perspective any reversal in trends should be made by minimum three waves, so on our chart wave C is still missing which should take price below end of wave A. Also, there is a bearish H&S pattern, which is pointing lower too. 
   



So my conclusion is that DAX will drop, same thing is with Nikkei and FTSE100 which are in similar situation, and this could cause a temporary limited upside on S&P500 as well. My view remains unchanged as long as November highs on DAX are not breached.

If you want to be on track with intraday price move of Dax and other correlated markets, such as EURUSD, then you may consider to take a trial of our services.

Trade well,
GH



 

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