It has been over four months since we last wrote about the German DAX 30. The blue chip index was trading around 12 700 following a sharp selloff from as high as 13 602. However, despite the fact that this plunge looked quite scary, the Elliott Wave Principle suggested that “it looks more like another dip to take advantage of.” Unfortunately, the DAX 30 fell by another 1000 point to 11 727 before finally finding a support strong enough to discourage the bears, so we definitely failed to catch the bottom. The good news is that by late-May the benchmark was hovering above 13 200 again. The hourly chart of the German DAX 30 below visualizes the wave structure of this rally and allows us to check if the bulls are still in control.
The recovery from 11 727 to 13 204 looks like a textbook five-wave impulse with an extended fifth wave, labeled (i)-(ii)-(iii)-(iv)-(v), which fits in the position of wave 1 of (5) in the bigger picture. This pattern means that as long as the price stays above 11 727 the bull market is still alive. It also tell us that the recent drop from 13 204 to 12 548 is part of a natural three-wave (a)-(b)-(c) decline in wave 2 of (5).
If this count is correct, wave (c) of 2 should be expected to drag the DAX 30 to the support area between the 50% and 61.8% Fibonacci levels before the uptrend resumes. Besides, extended fifth waves are usually fully retraced by the following correction, which is another reason to prepare for more weakness towards 12 400 in the short-term.
In conclusion, we might see another 450-point decline, but unless the bears manage to breach 11 727 as well, the positive outlook for the DAX 30 remains valid. 14 000 is still a viable bullish target in the months ahead.
