DAX and FTSE

July 21, 2010 Hamilton

To elaborate (or add to the confusion) on the earlier S&P analysis here are both the DAX and the FTSE. Generally the FTSE , being English , correlates best with North American markets.

Both market have the same pattern as the SPX leading into this latest down trend (an expanding wedge). Thereafter the similarities stop. The FTSE does precisely what it should do, which is retrace the entire territory of the wedge, pretty well precisely (the only one to do so). The DAX, on the other hand, does nothing of the sort, in fact after the flash crash it manages to double top (the tops in April and June are for all intents and purposes at the same level). The FTSE probable corresponds best with the red count on the S&P. If so both the FTSE and the DAX should have a big move soon. The DAX which is most confusing is about to complete a triangulation that has been going on for either 2 or 4 months depending how the triangle is drawn. If it is in fact a triangle it normally goes UP in a thrust, if it is not – that is if the triangle is in fact a series of 1-2s of different degrees (3 of them) it should go DOWN hard to at least reach the base of the wedge. All told , looking at all three, down is more probable!

You can click on the charts to enlarge and move them around. I have add the SPX chart below for completeness.

TSE, DAX, FTSE and S&P

June 17, 2010June 17, 2010 Hamilton

Stock markets are behaving in rather strange ways lately, volatility is rather high with about 14 days with more than 90% up or down days over the last two months. Normally there are only 2 such days in an entire year. Only a month ago we had the flash crash and I understand that something like 70% of all trades in the S&P are now of the “frequent trading “ variety which essentially means that they are computer driven and almost always geared to momentum that is to say, mindless monkey do as monkey sees type of stuff. Very frustrating for both bears and bulls. Furthermore just a few days ago we were at levels fist reached back in September or October last year , meaning that we accomplished nothing for almost an entire year.

From an EW point of view things are not that much better. In both the S&P and the FTSE a clear 5 wave down can be seen followed by an equally clear counter-trend a-b-c. This very strongly suggests that the large down-leg anticipated has actually started. The TSE does not show the 5-waves down but the start could have been a “diagonal” type 2 (the only impulsive structure that allows overlap). The DAX, to be bearish, must have been a 1-2, 1-2 sequence but the percentage of the retracements is approaching levels that make this scenario less likely by the minute.

For the moment stand aside until things get clearer. Here are the charts;

DAX, as a proxy for TSX and S&P

June 4, 2010June 4, 2010 Hamilton

The question at this point is whether or not we are at the beginning of a tremendous sell-off, wave 3 of C within a multi-year correction or if we still have upside potential first. The action over the past few weeks has been ambiguous as is nearly always the case just to confuse us all. Using the DAX as a proxy I can come up with three basic scenarios, the first (in purple) is bullish as we had a simple a-b-c correction and are now on our way to a new high; this would be valid in either a 3-3-5 flat structure or a 5-3-5 zigzag. I have little confidence in this scenario considering the big picture in which we retraced 62% of the entire down move.

The second possibility (in green) is that we traced a 1-2, (1)-(2), a fairly common occurrence where waves of different degrees sort of merge. This would require a 5-3-5-3 pattern which, with a little imagination may actually have occurred. This is a decidedly bearish situation! It fits the bigger picture to a tee.

The third possible scenario (blue) is that we had a first wave down followed by a a-b-c counter-trend correction. This scenario is unlikely to be correct as the b-leg is very obviously a 5-wave affaire which it should not be! Apart from that, this too is a bearish scenario as , once complete, we go straight down again. The critical level to watch is about 6200 on the upside and , of course 5600 on the downside.

For the moment, the evidence in this case as well as in the bigger picture points to the most bearish scenario as the correct one. Instead of the DAX, the Can Dollar can also be used and, for that matter also the S&P, see below.

The S&P, by the way, allows for a fourth interpretation wherein the entire pattern is just one single first wave down followed by a rather pathetic counter trend, again bearish.

TSE = DAX

May 27, 2010May 27, 2010 Hamilton

By the way, the TSE and the DAX are still listening to the same drummer, just enlarge the two charts below and slide one next to the other. The a-b-c X a-b-c count is just a guess; in both the TSE and the DAX a rising wedge or “diagonal” could be fitted in even though that would make the 3d wave within the diagonal the shortest which should not be.

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