DAX is trading above the important junction of 9300-9350 as I explained last time. Yesterday we saw DAX breaking above the 61.8% retracement level and reach 9470 only to reverse a bit later back below 9400. I believe that DAX has really broken out and is just back testing the break out area. All I need now is a close above 9400 and to hold 9150. Eventually 9470 will break if we hold support at 9300-9150 and this will also imply a great year-end rally to come with new higher highs above 10k.
DAX is testing the Ichimoku cloud on a daily basis and a clear break above the cloud will be a bullish sign. The weekly chart in DAX as shown below is also very bullish as price has broken above the weekly cloud resistance.
The decline from it’s all time highs is a corrective three wave pattern with the last downward move a perfect 5 wave decline. But what are bears believe? Bears believe that DAX is making a couple of 1-2 waves and we are currently in the lesser degree wave 2. But is it possible for a wave 2 of lesser degree to be bigger than the wave 2 of a higher degree? Not something we usually see. Moreover 2nd waves usually retrace 61.8% of 1st waves, so a close above 61.8% is not a good sign for bulls. This bearish wave count with the couple of 1-2 waves will be canceled if we break above the intermediate high at 9891. Until then all I can say is that as long as the index remains above 9300 and if we close above 9400, there are more chances of the decline to be a corrective one and to see a move towards new highs rather than an impulsive downward move from it’s all time highs.
As always, thank you for taking the time to read my thoughts.