The German benchmark DAX 30 index is beginning to show signs of a trend reversal from bearish to bullish, fueled by the optimism in the Trump administration's economic rescue plan.
This Tuesday session, the German index had an extraordinary double-digit advance equivalent to 10.32%, climbing to 9,724.8 pts. During the Wednesday session, DAX is trading slightly bearish at 9,671, equal to -0.14% after reaching 10,031 pts during the start of the European session.
On the technical side, from the Elliott wave perspective, the hourly chart shows that the German index passed a diagonal ending formation, which corresponds to a terminal trend structure.
It should be noted that the first signs of reversal from the downtrend began to be reflected after the failure of the fifth wave of Subminuette degree identified in green, which failed to pierce the low touched by wave iii in green, which moved below 8,000 pts at 7,983.2 pts.
Likewise, the RSI oscillator began to show signs of exhaustion of the downtrend by reflecting bullish divergences, which are identified in red.
Once the German index touched the low of 8,332.6 pts during the Monday 23rd session, corresponding to the end of wave v in green, and after overcoming and closing above the end of wave iv also marked in green, which stands at 9,082.4 pts, the price action confirmed the end of the downward corrective cycle.
The following bullish movement that DAX 30 began to develop on Tuesday 24th's session has the characteristics of an impulsive bullish move, which we identify as wave (i) in blue.
Currently, we see the German index moving slightly bearish. This movement could correspond to a wave (ii) labeled in blue.
On the other hand, we see in the RSI oscillator that it has begun to move above level 60, and even reach level 80. This context makes us foresee that the bullish bias is dominating market sentiment.
In this way, the support of the RSI at the level of 40 could alert us that the price is finding support and could begin to develop a new bullish movement. We must remember that the corrective sequence has a three-wave internal structure, and is still in progress.
In conclusion, for the next sessions, we expect the completion of the short-term corrective movement corresponding to wave (ii) that is still in progress. Once this bearish move is over, the bullish impulsive sequence that is likelu to start could drive the German index to new highs.
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