DAX

DAX, March 27 2010

Hamilton

DAX march 27 2010

Here, using the DAX is the “problem “that we have right now:  as with the Can. Dollar the two legs down from the top are very similar which can mean two things; one, it is all one correction implying that the market goes back up fro a while ,or, two this is a 1-2 , 1-2 start of a major decline. As it is difficult to place a correction in the bigger picture I prefer the bearish outlook but at this particular point it may be worth standing on the side lines. Keep in mind that a 1-2, 1-2 sequence often look alike in their retracement levels which could mean that the Dax could return to the 6100/6200 level, before we even know where we stand. Here is the big picture; which would suggest that the rally from the lows from a year ago was an a-b-c X a-b-c, where both legs are equal in distance travelled but not in time. Three of these in a row is possible but IMO not very likely given the 62% retracement already achieved.

DAX March 27 2010 2

By the way, today’s continuation of the bull is supposedly due to vague statements from China with regard to their use of the Euro as a reserve currency.

The importance of Fibo 0.618, TSX, Dax, S&P.

Hamilton

One should never underestimate the value of Fibo ratios in this business or, for that matter any other (Google the fellow from Pisa and you will be amazed at all the mathematical properties of this “golden “ ratio.  Any way to try this out once again I have taken the 5 year charts of the TSX, the Dax, and the S&P. Here they are (click on them to enlarge).

tsx may 19 2010 DAX May 19 2010

S&P May 19 2010

For all three I have taken the high, the low and taken 61.8% of the difference and added that back to the low.  For the TSX the high was 14969, the low 7591 and the difference 7378.^61.8%of that is 4559 added back to the low gives 12150.

For the DAX the numbers are 8092, 3666, 2735 which yields 6401

And for the S&P 1557, 683,874,540 and 1223.

Please note that these numbers do not correspond precisely with the actual highs or lows as these may not reflect the intraday trades or may suffer from other, minor deficiencies. The point here is that all three came within 1/10%-2.5% of these targets. For the TSX the target of 12150 was slightly exceeded as the high was 12280 (off by about 1%), the Dax with a target of 6401 hit 6249 or short by about 2 %, and the S&P with a target of 1223 made 1217 off by only a miniscule amount. Just for the record, these targets were calculated a very long time ago! the main frustration was the time it took to get there.

    So what do the TSX, Dax and S&P have in common? Precious little except that in bear markets the correlations between asset classes tend to approach 1, and the more the world globalizes and we all read the same stuff, the faster this is happening.

TSE , DAX and S&P

Hamilton

Today the TSE traded at or above the 12135 level consistently for the first time. This is the level that we mentioned, now more than a year ago, as a very good possibility for a retracement.  I myself did not have the patience to wait this long, expecting the whole thing to take about half as much time as it has, so it is not clearly something that one could have traded to the fullest, after all after 50% who really knows. Now that we are here probabilities are turning to the negative, which is not to say that the market cannot go (a lot?) higher, but that the likelihood of that happening is very low.

Further more its is interesting to note that not just the TSE but also the DAX and the S&P are, roughly speaking, at the very same spot right at this time. We are talking indexes, not individual stocks so some discretion is required but the conclusion should be to sell just about everything!

TSE April1 2010 DAX April1 2010

 S&P April1 2010

Remember, you can enlarge these charts by clicking on them and you can then put them side by side if you wish.

DAX Feb. 2010

Hamilton

The DAX is not that much different from the TSE or the Dow Jones, most charts are pretty similar as is NORMAL in bear markets as the correlations move close to 1. Here is the DAX again.

DAX feb 2010

I always marvel at how well EW actually describes what should happen. Roughly speaking we went down 50+% and then retraced 50+% in almost text-book fashion. There can be a lot of argument concerning some of the details, like what is the real top and did we ,or did we not have a triangle in 4, most of which is not all that relevant to what should happen next. 5 waves never stand alone. so another set should be forthcoming , which should take us to a new low or , if a more complex correction is occurring, to at least 4500.

Just to complete the picture , here is the TSE for comparison purposes.

TSE feb 2010

There are others like the AEX or even the FTSE that look identical for all intents and purposes.