SX5E: eyeing a rebounce from 3.9k, downward pressure remainsGame plan:
after the STOXX 50 drops into the target box around 3.93k, try to (not aggressively) long a short term rebounce.
Overview:
After a strong bull run off the covid low, the SX5E struct a major top in Nov '21. Since then we are in corrective territory, which makes me default to the ABC count of Elliott Wave.
Most commonly, C wave projects to the 1.0 to 1.382 extension of A wave. So if my count is correct, I'm expecting a local bottom to be struct just under 4k, from where I will try to play a short term rebounce.
The red arrows at the lower left corner come from two major lows struct in Jul and Oct '21. They might also have some indicative value.
As I previously, jokingly, noticed that the market seems to find a local bottom around the opening day of the Winter Olympics, Feb 4th might just be the day to watch ;)
Further I'm also expecting one more leg down after the rebounce, but that will depend on where this rebounce ends.
EW interpretation:
The initial drop in Dec '21 can be regarded as wave circle a, while circle b ran back to almost the top again, almost 100% retracement of circle a. These are marked in yellow and their fib levels help me put the yellow target box roughly between 3.87k and 4.01k.
Note that circle b itself has an outspoken 3 waves structure, marked in blue. Subwave (b) retraced to almost 100% of (a) while subwave (c) reached between 1.236 and 1.382 extension of subwave (a). Symmetry might be in play here.
By my count we are currently in progress of circle c, which should have a structure with 5 subwaves, marked in azure. The sharp decline in the last few sessions fits the impulsive character of wave (iii) of c, it's usually a reliable signal that a (stage of the) correction is near completion and a reversal is due.
Invalidation:
If SX5E recovers the top of subwave (ii) without dropping into the target box first, my count is likely wrong and no entry will be attempted.
On the other hand, if SX5E drops below the yellow bow, then I will have to reassess the entry and stop level.
The ideal entry signal will be when SX5E break out of the blue box to the upside, after fallen into it. Stop can be place just under the yellow box.
