Sentiment is Bearish
U.S. stock markets were reeling last week as the Trump administration was engaged in reputational ‘damage-limitation’ over the President’s Charlottesville comments that drew a moral equivalence between neo-Nazis and anti-fascists. The fallout that followed resulted in the resignation of Trump’s ‘America First’ architect Steve Bannon as White House chief strategist. Losing an ally is one thing but when major industry chiefs began to resign from Trump’s advisory councils, the markets listen, then react as they did last week with sharp declines in the benchmark S&P 500 index.
This latest sell-off comes at a time of heightened anxiety over recent warnings from industry luminaries over the high readings from the CAPE (Cyclically-Adjusted Price/Earnings) and S&P/Sales ratios. Yes, they are historically high but are not at all-time highs and even if they were, as the time-old adage states, never be afraid of buying high if the market is still trending higher!
Whilst sentiment is clearly bearish right now, there are signs that this will change later this week. The S&P, Dow Jones and Nasdaq 100 are engaged in corrective declines which are somewhat complex in their Elliott Wave pattern criteria, which opens the way for slightly variant permutational possibilities. But Europe’s Xetra Dax has no such ambiguities.
Xetra Dax Sets the Trend
The Dax began declining from its June ’17 high of 12948.50 (futures) as a 4th wave correction within the dominant, larger uptrend that started from the Feb.’16 low. It has since completed a picture-perfect three wave zig zag pattern into last week’s low at 11926.00 – see fig #1.
Fig #1 - Xetra Dax 30 Index - 240 mins. chart by WaveTrack International
Labelled in minute degree, a-b-c, this pattern subdivides into a required 5-3-5 sequence whilst adhering to dimensionally perfect Fib-Price-Ratio (FPR) measurements. For example:
Wave a x 61.8% ratio minus 12303.00 = Wave c low at 11926.00
In other words, extending wave a by a fib. 61.8% ratio at its low of 12303.00 projects a terminal low for wave c at the exact low of 11926.00. This use of the ‘golden-ratio’ and phi is paramount in verifying corrective patterns like this.
The following advance from the low of 11926.00 has unfolded into a five wave expanding-impulse pattern to 12295.00 (see inset). This ‘proofs’ the preceding zig zag ended at 11926.00 whilst confirming a new uptrend. It’s only a matter of a day or so before the index turns back higher.
The Xetra Dax, therefore, sets the trend for other major indices to begin a synchronised recovery during the coming week. So fear not – shake off the bearish sentiment – start to look forward to some impressive gains!
WaveTrack International and its related publications apply R.N.Elliott's "The Wave Principle" to historical market price activity which categorises and interprets the progress of future price patterns according to this methodology. Whilst it may be reasonable to deduce a course of action regarding investments as a result of such application, at no time or on any occasion will specific securities, futures, options or commodities of any kind be recommended for purchase or sale. Publications containing forecasts are therefore intended for information purposes only. Any opinion contained in these reports is only a statement of our views and are based on information we believe to be reliable but no guarantee is given as to its accuracy or completeness. Markets are volatile and therefore subject to rapid an unexpected price changes. Any person relying on information contained in these reports does so at their own risk entirely and no liability is accepted by WaveTrack in respect thereof. © All rights are copyrights to WaveTrack. Reproduction and / or dissemination without WaveTrack's prior consent is strictly forbidden. We encourage reviews, quotation and reference but request that full credit is given.
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