According to The Elliott Wave Principle, five-wave sequences show the direction of the trend. Those patterns are called impulses. After every impulse, a correction should follow. When it is finished, the trend could be expected to resume. If we take a look at France’s CAC 40 index, we could be able to recognize the above-described Elliott Wave pattern.
CAC 40 declined from 4600 to 4275 in impulsive manner with its wave 5 being extended. Fifth wave extensions are usually fully retraced. This means, that wave (2)/B would probably go back to the level, where wave 5 starts – around 4480. It is also the level of the 61.8% Fibonacci level. We expect this zone to be reached before the downtrend resumes in wave (3)/C. This count would be invalidated, if CAC 40 returns to 4600.
