(1) There was a perfect setup against key trendline at 11,850 (blue line in Logarithmic). Obvious perfection often does not work > Solution: undershoot or overshoot. Here: Overshoot 4%.
(2) Elliott - At 12,208, the Elliott wave pattern since Dec14 is complete. Wave iv of 5 of V in Big III.
(3) Fibonacci - In those waves, Wave V = Wave III and wave v = wave iii
(4) Hidden trendline – The red line on the chart below is probably very important (especially the way it was fitted in Jun14) – Likely to retain.
(5) R3 annual hit at 12,206 – That alone is a very important statistical target (note how the Pivot retained exactly in Jan15).
(6) ATR Band (proprietary indicator): the top band is at 11,700, there was a 5% excess. This is unlikely to get more stretched before some lateralisation and moving average catchup.
(8) We do not have a long lasting global phenomenon like in January 2000. This is only a DAX story for now.
(9) EURUSD which has been the initiator of this move is not marking new lows and could actually rebound from here.
(10) Unless SP500 breaks 2100 again, it is probably subject to a correction below 2000.
(11) Extremely bullish News Flow this weekend given the close on Friday – Consistent with TOPS (necessary but not sufficient though).
(12) Time sequence – 26 days up in wave V – that is consistent with previous vertical climax since May13.
(13) Time Sequence – Last week completed 9 weeks vertical up – The likelyhood of a top or at least some weeks down is increasing.
(14) Progress: 46% From Oct14 to Mar15 (5 months) - Note that Big wave I was also 45% from Oct11 to Mar12 (5months).
Confirmation: trading below 11,800 Invalidation: trading above 12,450 My Pain Stop for now: 12,350
Comments
brianhimmelstrupnielsen
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this is also the first time in history that the DAX had 9 up-weeks in a row...
YaKa
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Interesting Brian.
YaKa
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Confirmation Local top in place on tonights close
shenkw85
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One the 11,800 level is broken, the momentum for corrections should should increase accordingly....
brianhimmelstrupnielsen
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What really "worries" me, is that the DAX is near the same levels in RSI and distance to MA200 as it was back in 2008 before the crash....
(my BMADP is just a corrected Kairi indicator measureing the distance to the MA200)
Plus the dax is more the 300 points ABOVE the bollinger band top on a monthly chart....in my eyes it all cries for correction.tradingview.com/v/22FuKLHf/
YaKa
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The right comparison is what happened form Sep99 to Mar00. It was probably extreme but it happened.
So in a configuration like this one, there is a high probability the market will recede, there is a small probability it is doing something as extreme as Mar2000.
Technician
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Hi Yacine, great analysis. But if you must be in equities, what would choose, U.S., Europe, Asia? In other words, in your view whos going to outperform in the coming months to year...?
YaKa
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Hi Technician, I am not sure i have the answer but clearly it depends of the currency performance too.
My thought process would be:
- So far, back in USD, SP500 is the best peformer and DAX the worst...
- From here a shakeout in equities could also occur with a shakeout in USD vs JPY and EUR.
- If you believe things will normalise in pricing, DAX has still a lot to catchup versus SP500.
It is difficult to conclude but after the next correction I think I would buy DAX but would watch EURUSD.
If DAX corrects while EURUSD Jumps back to 1.1800, I would buy DAX and hedge EURUSD at the same time.
Technician
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Yes make total sense. If USD continues to outperform (normal as monetary policies diverge between europe,japan and U.S.) and yields rise. Money will probably flow to Europe and Japan(just started QE)
YaKa
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But I am going to answer a question you did not ask:
In the big picture we may have some syncing process with europe catching up but I think the bulk of the rally is behind in time and price and we shall have either a large correction or at least some flat/down trading for a while until 2017.
Apple 150 yours
SP500 2150 yours
DAX 13000 yours
Biotech may have a last climax to very high levels in Sep15 but after that it may the end on all indices.
I think it is the end.
To be honest, i thought that in Oct13 and was wrong.... I had this idea in mind of July/Oct14.. it did not move much since that in USD, Sp500 is still in the same area and DAX computed in USD hardly moved but it is optically strong due to currency devaluation.
This virtual strength may last for a while and support the markets that are already on or close to target but overall I think we are due for a correction (be it flat: note that UK has not moved for 2 years now).