Last week on German stocks wasn’t very lucky for investors. DAX managed to reach 11,430 pts, the index wasn’t on this level since August. However Thursday’s decrease was supported by huge volume and easily broke few supports (for example 11,180, 11,000 pts). Depreciation was stopped by support in 10,600 pts area, which temporarily confirmed its power.
Bullish side see some hope in reaching fibo 38.2% retracement of whole bullish movement. The problem is in big volume which showed up after decreases and Elliott wave, which I will present lower. DAX is moving in correlation with EURUSD, on the other side it was not neutral for the movements of indices in the US. After last week’s NFP data it seems like interest rates hike on closest FED meeting is almost sure. It can consider short term drops, after which it came back to gains.
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Looking at Elliott waves, currently we have two possibilities (the same like last week when DAX was increasing):
- It is the end of 1st impulse of new bullish trend. DAX is now in wave 2, which often reaches 78.6% fibo, which is at 9,800 pts. After correction there should be next and biggest third wave of gains.
- Increases, which lasted from August, were just wave B of huge bearish ABC pattern. In this case we can see new bearish wave C which will enlarge this year’s low. What’s interesting if we check equality of A and C wave, price should reach to 8,350 pts, which is exactly at 2014 low. Then we should see beginning of new wave.
Right now it is impossible to say which scenario is more probable. Certainly we should watch EURSUD and S&P500 closely. On the chart below you can see both scenarios.
Better situation is right now on MDAX index. Last week it broke historical high and then there was a rebound. Decreases stopped on fibo 23.6%. Both situation on EURUSD and next week’s FED decision will influence this index, but it is more resilient than DAX.
