Wednesday, 4 August 2010

13:30 BST - DAX Update

I'm starting to prefer this count for the bearish view on the Dax, which puts us in a [i]-[ii] down from the April high, rather than having us in wave [iii] down as I showed when I last looked at the DAX:

DAX Daily - from April 2010 high:

So, I would count all of the sideways action since the May low as a wave (x) triangle. We would now be in wave (y), which will be a 3 wave affair. You can already see a 3 wave outline on the daily chart, so wave (y) may be just about done. Obviously, it can't take out the 6341.52 high if it does have more upside to go. 

If we do exceed that 6341.52 high, then the bullish count comes into play and the rally from the 20 July low would be the start of minor wave A up in another zig zag.

However, taking out the April high doesn't leave only the bullish count. Here's the daily chart from March 2009:

Dax Daily chart from March 2009:

You'll see from the April high I've labelled another alternative. It makes the April high wave (a) of [v] within the expanding diagonal for minor C of the second zig zag up from the March 2009 low. If this is playing out then we'd need to see 5 waves up from the 20 July low, rather than the three we currently have, so there could still be more upside. Having said that, the alternative count for wave [c] of C could easily be a (w)-(x)-(y), in which case, the 3 waves up from 20 July that we can already see may be just about enough to complete wave [v].

Obviously, the DAX is closer to its April high than any of the other main indices I follow. I've explained before why a new high in the Dax doesn't preclude the bearish count on those other indices, so just because it makes a new high does not mean that those others are bound to follow.

Having said that, we can't preclude the possibility that the Dax is leading the way back up, especially since the bullish counts I have (see Options 4 and 5 on the 60 min counts page and long term counts 3 and 5 on the Long Term Counts page) all remain viable at this stage.

Still, if the Dax alone takes out its April high, the odds would suggest its lagging  to the downside, rather than leading to the upside, perhaps in a repeat of the 2007 top. We'll just have to keep a close eye on the important levels on the main indices. At some point, the picture will clear up - at least that's the hope.