Examination of US and German Stock Markets

After the 02/24/22 bottom US stocks appeared to be poised for a rapid move up, but after two days a trading range developed. Meanwhile,  German stocks as  measured by the DEU40 have continued to make new decline lows. Evidence from the DEU40 could be providing clues as  to the near-term direction for the global stock market.   

The US stock market as  measured by the S&P 500 (SPX) has three potential Elliott wave counts. The 15 – minute SPX chart courtesy of Trading View illustrates  the action after the 02/24/22 bottom. 

Wave count #1: A series of “one’s’” and “two’s” up has developed after the 02/24/22 bottom.  This  is  a bullish count and implies the SPX could rally at least back to the high made on 01/04/22.  In this count the second wave “one” up – labeled as Minute wave “i” – boxed peaked on 03/03/22. The subsequent decline to 4284.98 is  the presumed Minute wave “ii.”  A  break below the 03/01/22 bottom at 4279.54 would invalidate this wave count,

Wave count #2: is  a Single Zigzag (A,B,C) corrective pattern. This  is a  bearish  wave count and implies a  move down at least back to the 02/24/22 bottom.   

Wave count #3: could be an Expanding Flat corrective pattern under development.  For the sake of clarity this  count is  not illustrated.  If it does develop, a future blog will show the details.   The important factor is where the potential Expanding Flat could terminate.  There’s a secondary Fibonacci coordinate close to the 50% retracement level of the SPX 02/24/22 to 03/03/22 rally. The  green rectangle represents the zone where the Expanding Flat could terminate.  If  the SPX does decline and bottoms in this zone it would create a bear trap for traders shorting the break below the 03/01/22 bottom at 4279.54. 

The daily DEU40 illustrates  clues of a possible near-term bottom.

The DEU40 has gone just below the .382 retracement of the bull market from March 2020.  Additionally, it is  just above the chart bottoms made  on 12/14/20 and 12/20/20.  This  is  a logical support zone to expect at least a short-term bottom.

Momentum evidence supports this theory. Both daily Stochastic and RSI have reached the oversold zone.

If the DEU40 is  forming  a  near-term bottom- other major national stock indices could rally.  If so, the most like direction for the SPX on 03/07/22 is  up.

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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