Month: August 2010

DAX update

Hamilton

Stockcharts often does not update until the next day, but from other sources I understand that the DAX reached 6356 , a one year high. This negates quite a few bearish counts and certainly makes one wonder if that outlook might just be wrong. The only bearish outlook remaining is that of an irregular flat, irregular as the B-wave in the A-B-C actually rises above the beginning of the A-wave.  The nearest bullish case would be a diagonal as the first up-leg is clearly not 5-waves. Otherwise I am at a loss to count this thing- but remember that this is the only one that is out of line, for the moment. A return of the Wirtschaftswunder perhaps??

 

dax aug 4 2010

TSE

Hamilton

The TSE is just as confusing as all the others. Multiple possibilities exist, but if we simple follow the approach we had on the Dow Jones, we get the following;

TSE AUG 2010

As with the Dow and the DAX the TSE is loaded with overlaps, making it hard to come up with a confident count. The bearish count shown here assumes a wave 1 down (a diagonal type 2, a very rare beast that does allow overlap) followed by an A-B-C counter trend correction. Mathematically speaking the equivalent point on the TSE would be 11893, just 30 points away from where we were this morning. If nothing else this confirms that as with the Dow and the DAX the TSE is also at some critical point.

Other counts are possible. The most bearish would be the 1-2, (1)-(2) etc. situation where both wave 2s retraced an inordinate  percentage of the respective preceding down-legs. Another, less bearish count would have this whole thing as a diagonal type 2 structure, which I think is very unlikely.

On the bullish side, an argument could be made that a complete corrective move was finished at the early July low and that we are back in a bull market on our way to new highs.  This view makes more sense if one assumes that this correction started around Jan 7th and the chart above just shows the C wave of a larger A-B-C, itself a B wave in the much larger correction from the lows of May 2008 of about 7500. (as per below).

tse aug 2010 2

Very unlikely given the big picture!

DAX, all three scenarios

Hamilton

For those that are interested in the EW application to the DAX, here are the main 3 possibilities that I can see at this time;

DAX Aug Bull DAX Aug small bear

Dax Aug big bear

The first (blue) is the bullish scenario. It does not rhyme very well with any other market and seems to contradict the “big” picture. Also wave c in a triangle is usually the most complex one which is not the case. The next bearish scenario (green) is that the triangle actually does exist but is preceded by an a-b-c wave A, suggesting that a large flat is in the making. This scenario is bearish but not dramatically so, as once the flat is finished not far from the recent lows the next big move is higher. This triangle still needs at least a d and e wave so there will be a few more months of essentially sideways movement. Ultimately the correction will last to mid 2011 before the bear market reasserts itself. The last (purple) scenario is the real bearish outlook. Next big wave should be wave 3 of 3 down, usually the most dramatic part. There are a few minor imperfections that make this outlook not totally elegant in a EW sense, but we will overlook that. Note that this scenario will be negated if the DAX climbs above 6341 , just 40 points away.

By the way, the Dow came to within 2 points of 1694, the 61.8% retracement I calculated this morning. Perhaps it means some thing, perhaps not, but interestingly both the Dow and the Dax are at critical junctures.

DAX update

Hamilton

DAX Aug 2010 1

Here is the longer term bearish case for the DAX, from about 8100 it dropped to 3600, just a little more than some other markets and it did so (arguable) in 5 waves. We know that 5 waves never stand alone hence the expectation that the next upward correction would be just that , a correction. Like most other markets the DAX also managed its way back to about the 62% retracement, almost precisely what the S&P, TSE, FTSE and a half dozen other indexes did.

dax AUG 2

Lately, for almost a whole year, this index has not gained very much falling back to levels that had been reached already by October last year. Obviously the momentum is pretty well dead, furthermore the overlaps that are occurring every 3/4 months make it next to impossible to count this action as impulsive! A triangle seems to be forming which would suggest that we get one more spurt up (about 600 points) in a thrust. This does not make sense in the bigger context so a series of 1-2, (1)-(2) etc. could be what is happening. We should not trade above 6400 or so to keep this possibility alive. (these charts are semi-log!).

Abbey Joseph Cohen is calling for 1250/1300 by year end on the S&P, presumable Goldman is long.