Link to Steen’s mention of Elliott Wave (EW)
First some (EW) principles – in short:
- Wave 1 and 2 are often not easy recognizable. Wave 1 is where there is not much positive or negative news. Elliott waves can be both bullish and bearish trends.
- Wave 2 is a minor correction of wave one. It cannot go beyond wave one.
Volume is usually light.
- Wave 3 is usually the largest of the five EW’s. Powerful and often extends wave 1 by a Fibonacci ratio 1.618. Volume is usually heavy.
- Wave 4 is a corrective wave. It usually retrace 0.382 of Wave 3 but can extend further. Wave 4 often consists of three minor waves called ABC. Other combinations also apply. Volume is fair.
- Wave 5 is the exhaustive wave (in commodities wave 5 can sometimes be the longest). Volume less than in wave 3 particularly at the end.
DAX (cash) Index opened above the 0.382 retracement, more or less in the middle of the body gap between 10,438 and 9,864. A close of the gap would signal further upside. However, it could also be the completion of the ABC correction in wave 4 we have seen.
Wave 4 was initiated by divergence on RSI indicated the down trend was weakening and a rebound was in the cards.