DAX - Pay attention to Europe
When European stocks closed down for the June quarter I noted in the July LSR that this was a market leading the decline in world equities again. So the recent bounce back from the 40 week averages for European equities is either a near term bottom or simply a temporary pause in the decline already underway. The fall has been impulsive and broken many trendlines. In case of the German DAX - the fall can be considered a leading diagonal. This is a wedge like triangle pattern. This means that wave 1/A is complete and we are bouncing out of it. Usually after this wave 3/C down is very sharp and fast. Watch if DAX is unable to go above 12325-12400 and starts a sell off. If that happens then a move down to 11400 or as far as 10885 [3=1.618 times 1] can follow and take just 1/3 of the time that wave 1 took. That means by the end of the month. I doubt it would be a Germany only event. Such a move would have to be a European event.