Tuesday, 29 June 2010

10:43 BST - DAX Update

On 24 June, the Dax looked like it might have topped in wave [ii] and started a wave [iii] down.

While the bullish possibilities mentioned in that last post still remain, here is a potentially bearish count that could mean that the Dax is about to play catch up with the other major indices:

Dax 15 min chart:

This count puts it in wave [3] of i of [iii] down as of today. I've put in a label for wave (1) of [3], but its not clear that wave (1) is finished.

Here is the count on a 60 min chart with the ichimoku overlaid, showing how the bullish picture as late as 17 June has just turned around now with all the ichimoku components below the cloud. There was a test of the underside of the cloud by the lagging line (turquoise), but, for the time being, it has failed to recapture the cloud and is headed firmly down:

Dax 60 min ichimoku:

You can see that for a time, while price tested the underside of the cloud and the turning line (blue) on 24 June, the lagging line looked like it would find support on top of the cloud (see what it was doing on 21 June - 26 periods back from the price action mentioned). However, it was unable to do so and as prices fell, it finally broke below the cloud too. Yesterday's wave [2] action in price caused a retest by the lagging line of the underside of the cloud, but today's gap down brought about a failure of that retest.

Of course, the level of 5634.64 mentioned in my last post has not been taken out, and until then (and even after that, as mentioned in my last post)  there remains the risk that this decline is just part of a correction in an on-going uptrend that will eventually take prices above the recent high.

Given the remaining risk of an eventual bullish outcome, this index needs to be watched closely as the price action develops, for early clues that this bearish count may be failing. I find that often, the ichimoku chart provides early clues of a trend change, so I'll be keeping a close eye on it. If the lagging line manages to get above the price line during any rally in prices, that may be the first warning signs (though obviously not conclusive) of a trend change and would suggest caution on the short side until it becomes apparent whether any such move will be sustained.