DAX 30 Big Picture
The DAX as a ZigZag correction.
Rules of the ZigZag correction.
1. Wave A must be an impulse or Leading Diagonal Triangle ✅
2. Wave B must be any corrective pattern (ABC) ✅
3. Wave b does not correct wave A more than 99% ✅
4. Wave C must be an impulse or Ending diagonal Triangle ❓
5. Wave C must be at least 70% of wave B from a price perspective ❓
6. Wave C fails extremely rarely (strong wave C) ❓
Current course.
The DAX formed a Leading Diagonal Triangle since the beginning of 2022, which can be represented as an ABCDE or 12345 wave.
The DAX was able to break out strongly from the Leading Diagonal Triangle in recent weeks (since October), forming an abc correction.
We bounced off the upper trendline.
Further course
In the last days, the DAX shows first weaknesses and we assume that the DAX has already formed its TOP and now another downtrend follows.
If the assumption of the ZigZag correction is correct, now the DAX should form another 12345 structure to the downside, which should hold in the trend channel. There is also still the possibility that the DAX makes a final uptrend until about just above the upper trend line and only then crashes.
Depending on how the economic events will develop, we see 2 correction scenarios as likely:
1. the German or European recession comes harder than currently assumed and the DAX corrects below 10,000€.
2. the recession can be halfway cushioned and thus the financial market calms down faster and the DAX forms a bottom at around 10,500 to 11,000€.
We currently see the first possibility as more likely due to the economic environment. Interest rates will not be lowered in the foreseeable future. The real estate sector is under massive pressure. Many companies continue to struggle with the huge cost of energy and capital, and a large number of companies are still highly overvalued.
A perfect sentiment for a bear market to continue for another 6-12 months.
We will keep you posted!
Rules of the ZigZag correction.
1. Wave A must be an impulse or Leading Diagonal Triangle ✅
2. Wave B must be any corrective pattern (ABC) ✅
3. Wave b does not correct wave A more than 99% ✅
4. Wave C must be an impulse or Ending diagonal Triangle ❓
5. Wave C must be at least 70% of wave B from a price perspective ❓
6. Wave C fails extremely rarely (strong wave C) ❓
Current course.
The DAX formed a Leading Diagonal Triangle since the beginning of 2022, which can be represented as an ABCDE or 12345 wave.
The DAX was able to break out strongly from the Leading Diagonal Triangle in recent weeks (since October), forming an abc correction.
We bounced off the upper trendline.
Further course
In the last days, the DAX shows first weaknesses and we assume that the DAX has already formed its TOP and now another downtrend follows.
If the assumption of the ZigZag correction is correct, now the DAX should form another 12345 structure to the downside, which should hold in the trend channel. There is also still the possibility that the DAX makes a final uptrend until about just above the upper trend line and only then crashes.
Depending on how the economic events will develop, we see 2 correction scenarios as likely:
1. the German or European recession comes harder than currently assumed and the DAX corrects below 10,000€.
2. the recession can be halfway cushioned and thus the financial market calms down faster and the DAX forms a bottom at around 10,500 to 11,000€.
We currently see the first possibility as more likely due to the economic environment. Interest rates will not be lowered in the foreseeable future. The real estate sector is under massive pressure. Many companies continue to struggle with the huge cost of energy and capital, and a large number of companies are still highly overvalued.
A perfect sentiment for a bear market to continue for another 6-12 months.
We will keep you posted!
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