close icon

DAX Set to Lose Another 2000, Elliott Wave Suggests

The German DAX climbed to an all-time high of 13 597 in late-January. The benchmark had just exceeded the previous record of 12 391 set in April 2015 and the bulls were already bracing for even higher highs in the near future. Alas, it was not meant to be. As of this writing, the German blue chip index is hovering around 11 550, down over 2000 points since January. Is this a buy-the-dip opportunity or the beginning of a bigger decline?

DAX – 17 Months Ago

In order to find out we have to take a look at the big picture through the prism of the Elliott Wave Principle. The last time we did that was May 30th, 2017, and we shared the following chart in an article called “DAX 30: Time to Be Careful Now.”
dax 30 elliott wave analysis
The chart above allowed us to recognize that the five-wave impulse, which started in March 2009, was already approaching the end of its fifth and final wave. The theory states that a three-wave correction follows every impulse. This meant that “once wave V ends somewhere between 13 000 and 14 000, the bears should return to cause a 30%-35% pullback.

And Now…

The DAX made a bearish reversal slightly above the middle of that range. Unfortunately for the bulls, it is down by only 15% from the January top. That said, we suspect the market can erase another 2000 point before it starts to recover. The updated weekly chart below explains.
Elliott wave analysis German DAX
Here we see that the five-wave pattern we just discussed fits into the position of wave (III) of an even bigger impulse, which has been in progress since March 2003. This makes us think the current weakness is the beginning of a larger pullback in wave (IV). Fourth waves usually reach the termination level of previous fourth waves. Hence, we can expect a decline towards the support of wave IV of (III) between 10 000 and 9000.

The bearish MACD divergence between waves III and V of (III) is another reason not to buy this dip. The German DAX 30 can lose another 2000 points from now on.

On the other hand, the support of wave IV of (III) should be a strong one, since it coincides with the 38.2% Fibonacci level and the lower line of the trend channel drawn through the highs of waves (I) and (III). Low-risk buying opportunities should become available once the DAX drops below the 10 000 mark. For now, the table is tilted in favor of the bears.

Did you like this analysis? Our Elliott Wave Video Course can teach you how to uncover similar opportunities yourself!



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

S&P 500 Rallying Sharply, but Not Unexpectedly

S&P 500 bulls had a terrible October. The index was down 11% at one point, but managed to minimize the damage and finished the month down 7.3%. November, on the other hand, is looking a lot better, following a recovery of almost 100 points in the first seven days. President Trump’s reported request for a…

Read More »

DJ New Zealand Index Falling Off a Cliff

October brought a real bloodbath to stock markets around the world. The Dow Jones Industrial Average and the S&P 500 just turned negative for the year and equities in Japan, China and Germany are also falling in sympathy. While leading indices are plunging it’s no wonder that other countries’ benchmarks are suffering as well. The…

Read More »

Amsterdam Stock Exchange Index to Lose 20%

Similarly to the Dow Jones Industrial and the S&P 500, the Amsterdam stock exchange index, or AEX, has been in a uptrend since the end of the Financial crisis. Its journey to the north started from 195 in March 2009 and went on to almost 577 in July 2018. As of this writing, the Dutch…

Read More »

Dow Jones: Has the Crash Begun? Maybe

Historically speaking, October is one of the good months to be invested in the American stock market. According to Business Insider U.S. equities have mostly ended this month in positive territory, averaging 0.4% gain in the month of October since 1929. Not this October, though, and not for the Dow Jones Industrial. Excluding dividends, the…

Read More »

SPX: Do Not Miss the Forest for a Tree (Like We Did)

We show you how nailing the big picture is still not enough if you lose yourself in irrelevant details The SPX plunged 95 points or 3.3% yesterday. In this article we will tell you about a mistake we made, namely missing the forest for the trees, so you do not make it yourself next time.…

Read More »

Nifty 50 Bulls Unable to Stop the Bleeding

We published our last update on the Indian Nifty 50 almost four months ago, on June 6th, when the benchmark index was hovering around 10 550. Despite the recent selloff from 11 172 to 9 952, the Elliott Wave outlook was still positive. With the help of the chart below, we concluded the index is…

Read More »

Dollar Index Corrective Decline Far From Over

The U.S. dollar index fell less than two pips short of the 97.00 mark on August 15th. 96.98 was the best the bulls managed to achieve before the bears showed up to drag DXY to as low as 94.69 so far. On the other hand, the USD index has been steadily advancing since mid-February, when…

Read More »

More analyses