With S&P making new highs above 1515 and bulls looking strong….if you look at Europe you will see a bearish signal that will make you worry. Most major European Indices have completed or are about to complete 5 waves down. This impulsive downward move implies further weakness over the coming weeks for european stocks. And not just a small correction, but we could see a large scale correction that could push prices more than 10% lower. So why this contradiction between european indices and US markets? Who is one step ahead? Lets take a look at the European indices that signal the weakness we mentioned.
5 waves down complete and could start pull back up to test the 61.8% retracement.
Another index with a complete 5 wave sequence pointing more weakness ahead. Retracement might have already started.
European south could not be omitted from this group of weakening indices. Another 5 waves down complete.
IBEX was already mentioned in a previous post how weak it was looking and that prices were heading south after a break in the upward moving channel. Prices fell more than 600 points towards our second support level in a 5 wave pattern. Upward correction is expected to follow towards 50-61.8% retracement.
Last but not least is the German DAX. This is the only index that might not have yet finished the decline and could give another low in the next one or two sessions. This is the simple wave count. More complex and not strict counts could let us count 5 waves down in this index too. So weakness here also.
Why is the picture in Europe so different from the one across the Atlantic? will european markets re-energize bulls and push to new highs following the american markets?
This 5 wave downward pattern in European markets is a sign of weakness. The completion of those 5 waves down, is followed by an upward correction. Usually towards the 50 and 61,8% retracement. Then another stronger downward move will follow that will push prices lower than the end of the initial move. We have mentioned many times before that US markets although they continue their upward trend, they are very fragile. A correction in the markets may be imminent and the signs of one correction coming are there. We only have to be cautious and protect our positions. Raise stops and don’t try to doubt the market. Bearish moves are fast and decisions should be taken swiftly. Bulls should be on high alert.
As always, thank you for taking the time to catch up on my thinking.