Friday, 29 October 2010

11:11 BST - Dax Update

The triangle I saw in the Dax last time I posted (see here) wasn't complete, contrary to what I had previously labelled. It appears that it extended further, assuming that it is a triangle, as shown on the daily chart below:

Dax Daily:

As you can see, the possibility of more upside was what  transpired following the completion of this larger triangle. Out of that triangle we now have what looks like 5 waves up. Here it is on a close up of the daily chart from the April 2010 high:

Dax Daily chart close up from April high:

I've tentatively labelled the 5 waves out of the triangle as wave C of (Y) of [2] on the bear count. Its a 0.618 extension of wave A of (Y) and also, wave (Y) is 0.618 x wave (W). 

On the bullish count, however, this 5 waves out of the triangle could just be the end of minor A of wave (Z) up.

Here's a closer look on a 15 min chart showing the recent high and the bear count labelling:

Dax 15 min:

I've labelled an expanding leading diagonal down from the high. Its supposedly a rare pattern, but that's what it looks like to me. Also, the retracement of it, which I've labelled as wave [ii]  pretty much reached exactly the 78.6% level.

However, with markets having been so bullish of late, the benefit of the doubt has to be given to the upside. The diagonal I've labelled could just as easily be a triple zig zag correction prior to another advance (on either the bearish or the bullish count) or could be wave [a] of minor B within wave (Z) on the bullish count.

If we've seen a top on the bearish count, then I want to see this next decline move down impulsively to well below the low of wave [i] down at 6553.25. I'd then want to see the retracement that follows stay below that low so it can be counted as wave [iv], and then a further impulse down to complete wave [v]. 

That sort of decline would increase confidence in the bear count. However, until we take out the low at 6115.87, any decline could just be wave B within wave (Z) up on the bullish count. That assumes that on the bullish count I have wave (X) in the right place at that low.

So, its possible that we've seen a top on the bear count.  I think at this stage that we need to stay below the high labelled wave [ii] at 6644.61 and take out the low at 6553.25.  That would be a start on the bear count. However, I think that as long as we're above 6115.87, on my labelling, the possibility of further upside can't be ignored.