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Technical Update - DAX, S&P 500 and OMXC25

Technical Update - DAX, S&P 500 and OMXC25

Equities
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

Summary:  As a follow up to Steen's mention of Elliott Wave (EW), let's have a look at where we could be in today's markets.

Link to Steen’s mention of Elliott Wave (EW)

First some (EW) principles – in short:

  • Wave 1 and 2 are often not easy recognizable. Wave 1 is where there is not much positive or negative news. Elliott waves can be both bullish and bearish trends.  
  • Wave 2 is a minor correction of wave one.  It cannot go beyond wave one.
    Volume is usually light.
  • Wave 3 is usually the largest of the five EW’s. Powerful and often extends wave 1 by a Fibonacci ratio 1.618. Volume is usually heavy.
  • Wave 4 is a corrective wave. It usually retrace 0.382 of Wave 3 but can extend further. Wave 4 often consists of three minor waves called ABC. Other combinations also apply. Volume is fair.
  • Wave 5 is the exhaustive wave (in commodities wave 5 can sometimes be the longest). Volume less than in wave 3 particularly at the end.

DAX (cash) Index opened above the 0.382 retracement, more or less in the middle of the body gap between 10,438 and 9,864. A close of the gap would signal further upside. However, it could also be the completion of the ABC correction in wave 4 we have seen.

Wave 4 was initiated by divergence on RSI indicated the down trend was weakening and a rebound was in the cards.  

25_KML_1
Source: Saxo Group

On the DAX future/GER30 we can see the fourth wave has hit 0.382 retracement.

25_KML_2
Source: Saxo Group

OMX C25: Technical picture is identical DAX. Within few points of the 0.382 retracement   

25_KML_3
Source: Saxo Group

For S&P 500 the waves seem to be easy to recognize. We can see that wave 3 extended further than 1.618 of wave 1. It extended 1.764.
If the waves are as I have indicated on the chart, we are in a corrective wave 4 which should take the Index up to at least 2,553. However, there is room up to around 2,775

25_KML_4
Source: Saxo Group

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