Short Term Trading Member Forum

[techcharter]

German DAX update

6 Month Chart:

http://stockcharts.com/def/servlet/SC.web?c=$DAX,uu[w,a]dacayyay[dc][pb50!d20,2!f][vc60][iLp14,3,3!L...

3 Year Chart:

http://stockcharts.com/def/servlet/SC.web?c=$DAX,uu[w,a]wacayyay[df][pb50!d20,2!f][vc60][iLp14,3,3!L...


My previous comments about the DAX 3 weeks ago continue to be validated. Here's the update:

The DAX is nearly finished a convincing double zigzag bear market rally out of the March '03 lows. The second zigzag pushed slightly above 4623 this week. This is nearly a perfect Fibonacci Zig to Zag ratio of 2. There is also a Fibonacci ratio in time; the zig and zag are both about 45 weeks long, with the zag slightly shorter. Zooming in on wave c of the zag shows a nearly finished 5 waves up from the April '05 lows. One more week should finish 5 of 5 of c of zag.

At a larger degree, there are Fibonacci price and time ratios of the Y2k selloff to the bear market rally. The price ratio is bear rally = 40% of Y2K bear market bubble pop. This pretty close to a fibonacci 38.2%. The time ratio is bear rally = 77.7% of Y2K bear market bubble pop. This is pretty close to a fibonacci 78.6% (= .618 x .618)

Other techincal indicators support a turn in the near future.

The daily stochastics have been overbought for a month and are falling below the 80% line (SELL) and the signal fell below the reference (SELL). The weekly stochastics reached overbought levels about 3 weeks ago and the signal looks to be dropping below the reference. The long and short term stochastics are indicating the DAX heads lower very soon.

The daily MACD signal has turned lower and is about to cross below the reference (SELL). Over the past 3 years the weekly stochastics have been giving false buy signals near major market turns. This time should be no different. It is interesting to note the weekly MACD has formed a 3 yerar symmetric triangle and is wrapping up wave e.

Daily Bollinger bands pinched this week and are opening wider. This indicates a big move is about to occur. This is the second pinch since the move off the April '05 lows. Pinches occur when the market consolidates and and becomes less volatile such as wave 2's and 4's. So in this situation the first pinch maps to wave 2, and the second pinch maps to a wave 4 of a motive elliott wave. The wave principle take precedence over bollinger bands. Through May '05 the DAX kept breaking the upper band in a steady climb higher. This maps to a wave 3. So the near term bollinger bands are calling for a possible wave 5 (maybe a daytrade long, definitely a long term SELL). As the bands widen,
the lower band will become support for the DAX as it heads lower. You can see there is a 200 pt difference already, so the pullback should be of a larger order than the April '05 rally. The Weekly bollinger bands have been opening for several weeks now. The DAX has broken the upper bands the past 4 consecutive weeks on weekly gains. This NEVER happened since the '03 Bear market rally began. It represents a market blowoff.

These Elliott wave structures, fibonacci ratios, and other technical indicators are giving strong signals a market top is near, and an extremely strong move to the downside is imminent. I estimate the top will be in place within 2 weeks as time and price converge a little more.

The basic analysis applies to the FTSE. However, the DJIA, SP500, NASDAQ, Nikkei, and Hang Seng look more like a triangle or ending diagonal of a flat. The Nikkei, Hang Seng, NASDAQ, DJIA, and SP500 have not confirmed the DAX rally. The US markets are trying to rally to avoid truncation. The Nikkei looks to have started its Bear Market '05 while the Hang Seng is in waves d, e or Bear '05. Too difficult to tell.

Technically the European markets have been the strongest, the US markets in the middle, and the Asian markets are the weakest. This is quite a contrast to the reports of European economy being the worst, the US economy being firm, and Japan/Taiwan being in the middle.

The cliff is close. One more step and down you fall.