The Bears are not set free

[BREAKING NEWS ;) ] I opened a channel on Telegram to post intermediate term updates on this blog and other charts I find interesting. https://t.me/educatedguessNL

 

A  month ago I was rather optimistic about the DAX index for March, but, in the end, all gains were erased. My optimism is still there, but now I guess the structure of the waves suggests I have to be patient. Just as spring in Ottawa takes a long time, the snow has not completely disappeared and there is still ice on the river. I start with the analysis of the cycles. The Elliott Wave analysis will be next.

According to my monthly cycle count, the last quarterly cycle of the yearly cycle has started, and the last bar has been below the quarterly cycle bottom. This means we have to expect a bearish cycle, which is quite logical for the last cycle of a higher order cycle.

DAX monthly cycles

The quarterly cycle bottom is of course also a monthly cycle bottom.

DAX weekly cycles

There is one complete weekly cycle since the quarterly cycle bottom, the second weekly cycle is bearish and has 12 bars, so the next weekly cycle bottom could be in place in April or early May. Probably it will also be the midcycle low of the monthly cycle.

DAX dag cycle

Possibly the DAX has just started the last daily cycle of the weekly cycle, and that implies a weekly cycle bottom within four weeks, but the last cycle is short, so there is room for doubt.

My conclusion from the cycle analysis is that we have to expect a cycle bottom within a few weeks, and probably that will be the monthly mid-cycle low.

Now I turn to the Elliott Wave analysis.

DAX monthly EW

The monthly wave is counted as an impulse wave from March 2009, and it is nearing completion. Clearly, imho, the last wave is missing one more leg up. So, after the next weekly cycle bottom, I still expect a rally to a new all-time high.

DAX daily EW

The count of the last wave, [4] yellow, is quite complex. This is not unusual for a corrective wave. The structure seems to be an expanded flat, (w)-(x)-(y) red, where (y)  is an impulse wave. The last part, the fifth wave of the impulse, seems to become an ending diagonal.

The conclusion from the EW analysis is in accordance with the cycle analysis, with the extra that EW expects a new all-time high this year. The fourth subwave of the diagonal has to be shorter than the second, which limits the upside, and the fifth sub-wave has to be shorter than the third, which puts a limit on the expected downside. Violation of these rules will invalidate the wave count.

In short, I expect a tough three or four weeks before the rally will take off. The same holds for spring here, now everything looks gross because of the melting snow.

That is all for now, trade safe, the next update is to be expected in a month.

 

 

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Spring is in the air!

The scenario discussed in the two previous post is playing out as expected. By now the DAX index has reached the horizontal support zone:

DAX monthly

The monthly wave count is still incomplete, so there has to follow a wave up to a new all time high before a larger correction takes place (and even that may not be the most devastating one, but that case is less convincing, so I leave that discussion for the end of the expected fifth wave). Or, of course, the wave count may be false.

A few weeks ago I updated the previous post with this 180 min cycle chart of the DAX index:

DAX spot 180 min

I wrote that a break of the bearish flag to the upside would be a very bullish signal, but that break never actually happened, though the bulls really did their best. A look at the Elliott Wave count clearly shows why: a fifth wave down was missing.

DAX 180 min spot

It is hard to say whether the fifth wave is complete now, I think not, but if this wave count is correct there will be a bottom soon, after which either a rally to a new all time high will start, or we have to endure another couple of legs of this corrective wave.

So March 2018 started bearish, but chances are it ends very bullish.

Trade safe, greetings from Ottawa where spring is in the air!

 

 

 

 

 

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Schopenhauer

The first week of February was nothing less than spectacular, but I think: you ain’t seen nothing yet.

DAX Monthly

Price has arrived in the standard Elliott Wave target zone, i.e. the area of the lower order fourth wave. This means that one should expect the formation of a bottom and the start of a new leg up. According to my wave count, which of course can be wrong, no guarantees possible, this is only wave four of five. The power and the speed of the sell off though, may be an indication for what will come once wave five is complete!

DAX Weekly

There are two ways to count the weekly cycle. I prefer to count it as almost complete, consisting of 23 bars, but one can argue that the DAX is in the second weekly cycle since the last Monthly cycle bottom, in bar #10. In the last case it is conceivable that the sell off will continue until price reaches the 200 bar moving average around 10950.

DAX Daily

However, in the daily chart the wave down looks complete, and the structure from the November 2017 high is best interpreted as an expanded flat, a corrective wave, part or all of the expected wave four of five. Emphasis should be on “part” because there is no Elliott Wave rule that excludes extension of the correction.

DAX 15 min

Even under the microscope of the 15 min chart the wave down can be counted as a complete wave.

So, what to expect next?

There are two possibilities, imho. First, wave four is complete, then we will see a new motive wave to all-time highs. Second, the expanded flat is only the first sub-wave of wave four, and then there will probably be a sideways move for some time, and after a while the formation of a new low, and only thereafter a rally to a new all time high. Corrections have way more possibilities than motive waves, and are therefore very hard to predict.

Looking at the Monthly chart I guess it will be the first possibility because an extension of the correction will give wave five a rather unbalanced look. But that’s just a guess.

In the 15 min chart I have drawn a small flag from the  low, if it breaks to the upside I call it a False Flag  and I consider it to be a low risk buy signal.

Once wave five is complete I expect a really spectacular crash of the market that will dwarf everything we have seen since 1928. The financial system has become so instable by the low interest rates and the boundless creation of fiat money that a hard reset cannot be avoided anymore, IMHO of course, I’m a trained physicist, not an economist. The present situation reminds me of the well known Schopenhauer quote:

THE WORST HAS YET TO COME.

Trade safe, greetings from Ottawa, ON, Canada. I’m really enjoying a great winter here ;).

I’ll be writing again in about a month (or sooner, if anything interesting happens).

added Feb 10:

A nice summing up of the decline from another, non-technical, perspective by Mohammed El Erian:

https://www.bloomberg.com/view/articles/2018-02-09/10-things-to-know-about-the-stock-market-selloff

And another blog I like to follow:

https://northmantrader.com/2018/02/10/weekend-charts-shock-to-the-system/

added Feb 14:

DAX spot 180 min

A break of the flag from the low to the upside would be a bullish signal, and a first confirmation of the analysis above.

 

 

 

 

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