This morning the DAX shot up again to around 10253. A fairly clean triangle had developed over the past two months, now we are getting the “thrust”. This thrust should be good for about 1000 points given the size of the mouth of the triangle. As e bottomed at about 9600 that suggests about 10600 for a target. The apex is a month away at the most so a few more up days could do the trick.
By the way, EWG is not following the same pattern and is not even close to the peak.
The usual then – Nov. 5, 2014 – and now charts;
So we had a second buy at about $6, then an intervening sell at just under $10 but only if you were uncomfortable, now we would sell regardless. It is a nice double in about two months or 1000% or so compounded per annum. Our sell is based on uncertain wave structures and the application of the best motto in this business, “when in doubt, get out”. In the bigger picture here are the two main possibilities;
We will keep an eye on it but otherwise leave it alone un till the count becomes clear. By the way, Kinross (and quite a few others) have a similar a-b-c’s from the recent lows which warn that another down-leg is still possible. Note that the RSI and MACD both appear close to a critical level.
Ashanti suggests that we are in a new uptrend. This is not an absolute certainty but on the balance of probabilities this one at least looks ready to go up A break of about $13 would be very helpful.
I used a semi-log scale chart as it tends to work better of large ranges. This stock appears to have completed a large A-B-C flat correction. There is no reason to assume that it needs to go even further than the $7.45 low. There is no a-b-c potential bounce as can be observed on many other stocks.
Overnight the Swiss market dropped from 9277 to 7932 or about 14.4%, but that is in Swiss Francs so the only investors that are caught with their pants down, so to speak, are the Swiss themselves. Foreign investors get roughly the same amount back as a result of the appreciation of the Swiss Franc. For them nothing much changes other than that a vacation to St. Moritz will cost an even bigger fortune.
Was this all predictable from an EW perspective. Yes and no, see our previous blogs. But with hindsight it all fits pretty well. What we are looking at (in Swiss Francs) is a, give or take, 10+ year flat. Appropriately called that because in the end you end up where you were after the first down leg. The structure is basically a 3-3-5 A-B-C. We started the C overnight. C’s are always 5-wave moves.
The intervening up-leg , the B-wave, subdivides in 3 waves, an a-b-c. Often the c is 1.618x the a and in order to be flat it should end approximately at the double top level. It does all that! Furthermore the 5th wave of c of B is very often a “diagonal” (in English a wedge). In this case it is an expanding wedge as the amplitude increases as it nears the end (see our earlier blog on this aspect). Notice also the overlaps that can only occur in this pattern.
All this does not bode well for the Swiss, and with it , other markets. There are few reasonable alternative counts. The most obvious one would be that we are in a 5th large up wave from the lows of the great recession. In that scenario the overnight drop is the beginning of a 4th wave which might go to 7400 but not below 7000. Then the 5th of the 5th would take us to new highs around 11000 or so. This might be a possibility but it is not a good basis to be long this index.