The late-May counter-trend rally from 109.30 is completing now to 115.91, max. 116.91+/-. The index is poised to resume its five wave impulse downtrend that began from April’s high of 131.98 – 5th wave downside targets to complete primary wave A are towards 106.56-103.15+/-.
Winding the clock back to end-April when price levels were trading at 129.64, downside forecasts for the Eurostoxx Banks index were measured towards 112.15+/-. Since then, prices have accelerated lower as a five wave impulse pattern that originated from the April high of 131.98, but this remains incomplete – see fig #1.
This is primary wave A subdividing into an intermediate degree ‘expanding-impulse’ pattern, (1)-(2)-(3)-(4)-(5). At the very least, wave (3) ended into the late-May low of 109.30 with wave (4) approaching completion at 115.91 or perhaps extending just a little higher to 116.91+/-. The downside risk-skew is evident. Downside targets for wave (5) vary, at either 106.56+/- or max. 103.15+/-. The higher number is derived by extending the origin of this impulse pattern, from 131.98 to the point which began ‘price-expansion’ at 121.62 by a fib. 161.8% ratio. The lower is simply where wave (5) unfolds by a fib. 61.8% correlative ratio of waves (1)-(3).
There is certainly some short-term downside risk over the next few weeks basis June’s counter-trend rally coming to an end now – that will ensure a break below the late-May low of 109.30 towards 106.56+/-, max. 103.15+/-, a decline of min. -6.5% per cent, max. -11.75+/-. But further out, it seems the Eurostoxx Banks index will seek even lower numbers sometime towards year-end before completing this year’s correction.
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