European Weakness - DAX, FTSE100 and CAC 40 all pointing lower

DAX - S/H/S top points lower towards at least 8,877

FTSE 100 - S/H/S top point lower towards at least 5,646

CAC 40 - S/H/S top point lower to 3,884

CAC 40 - An even larger S/H/S top will be triggered by the decline to 3,884 and call for a continuation lower to 2,440

European Weakness - DAX, FTSE100 and CAC 40 all pointing lower 

All of the major European indices has completed S/H/S tops call for more downside. 

The German DAX should be headed lower towards at least the S/H/S measured target at 8,877, but the Elliott wave count calls for even more downside towards 7,750.

The UK FTSE 100 should be headed lower towards at least the S/H/S measured target at 5,646, but here the Elliott wave count call for more downside towards 5,440

The French CAC 40 should be headed lower towards at least the S/H/S measured target at 3,884, but here the Elliott wave count call for a continuation lower to 3,488.50. 

That said, I do see a clear risk for these declines to be of much greater magnitude. Especially the French CAC 40 looks very vulnerable as a break below 3,892 will trigger an even bigger S/H/S top with a measured downside target at 2,440.

France currently has more that enough on its mind. As host for the European Championship, where them Hooligans again seems on the rise. Two major terror attacks, strikes etc.

The UK with its EU referendum, where a win to the leave side seems more and more likely, creating lots of uncertainties. 

Finally Germany, the European economic locomotive that seems to be moving ahead in an ever more slowly pace and maybe even coming to a complete stop. Even worse the demographic in Germany will be a major drag on Germany economy for years to come.    

European trouble seems easy to find. It's much harder to find the bright spots... 

 

When a 1+ is highlighted in the right hand corner, more charts is available, in this chart-pack 4 charts can been seen. To see the other charts, click on the chart, which blows it up and in the center part at the bottom a control panel will be highlighted. Use the arrow to see the additional charts.

Nasdaq 100 - S/H/S top building

Nasdaq 100 - S/H/S top building

Nasdaq 100 - S/H/S top building

The Nasdaq 100 index topped at 4,781 in March 2000 and dived some 90% to a low of 795 ultimo September 2002 before staging a new large rally that most like topped 4,739 in late November 2015 and a major S/H/S top seems to be building. This top formation will not be complete before the neckline support near 3,800 is broken, but when this neckline support is broken the downside potential is once again huge. 

From an Elliott wave perspective a huge flat correction has been building since the March 2000 high. Wave [A] was the decline from 4,781 to 795 and was followed by wave [B] to the November 2015 high. Wave [B] peaked just below the 2000 high and is made up of three waves, where wave W moved from the 795 low to 2,239 wave and was followed by an X wave down to 1,035 in November 2008 from where wave Y took over for the rally to 4,739. Wave Y became an extended wave and extended by close to 261.8% the length of wave W. 

With wave Y in place, I'm currently looking for a break below support at 4,277 as the first strong indication that the right shoulder of the S/H/S topped at 4,591 and a test of the neckline support is developing. A break below the neckline support will call for a decline to just below the low of wave [A] at 795.

 

S&P 500 - Has begun a large correction

S&P 500 - Has begun a large correction

S&P 500 has begun a large correction 

Why is it, that whenever a large correction unfolds in the stock market, it's somehow manipulated? We never hear the same complaint when the stock market moves higher...

Is a correction always a bad thing? I think not. If you a long stocks, then yes. Unfortunately banks and investment managers has succeded in convincing most investors that a buy and hold strategy is the way to handle the stock market. I would be lying if I said, that this strategy was entirely wrong, because it does work wonders for long period of times, but when the larger corrections starts to unfold, the small investors always get caught and take huge losses, as they can only take so much pain. 

If you look at the long term chart above, you can see that an important bottom was found late 1974 and a huge rally into early 2000 was seen. Between the bottom in 1974 and late 1985 prices where caught in a base-channel, but when the base-channel resistance-line was broken in late 1985 an upside acceleration was seen. As always nothing in the financial markets moves in a straight line and who doesn't remember the price-collapse in 1987? But looking at the chart above, we can see that this prices collapse didn't just stop in the blue air, no it stopped right at the former resistance-line that now acted as support for the next rally higher. We saw the same line act as support in 2009. Will this correction find support on this line again? At this point I have no idea, but at least it gives us a possible downside target. Prior to this major support, we should also expect the former tops near 1,535 to act as support, but if broken the next low to look for is the support-line currently near 931. 

Regarding the chart above, I would like to point out something I find very interesting. If you measure the rally from the 1974 bottom to the 2000 top and add that distance to the 2009 low, you will find that the top seen at 2,137 is an almost perfect one-to-one distance. 

As you can see too, the that the support-line from 1987 that held prefectly in 2002 and was broken in 2008 now act as resistance, when it was hit in early 2015. Finally the support-line that has protected the downside since early 2009 low, was broken in the second quarter this year, so the risk has clearly turned towards the downside... 

 

Nasdaq 100 - Topping

Nasdaq 100 - Topping

Nasdaq 100 topping 

Is the Nasdaq 100 getting in sync with all the other major indices? Since the 2002 bottom the Nasdaq 100 has been moving higher. Not even during the financial crisis during 2008-2009 did the Nasdaq 100 make a new low, but held above the 2002 low has has staged an impressive rally along side the other indices since 2009 low, but it could well be in a topping process. 

The impulsive c wave, that has been unfolding since June 2012 has hit its first target at 4,329 however, to confirm that this was the top, a break below support at 4,206 is needed. That said a break below minor support at 4,278 will be the first warning of a possible top in place, but only a break below 4,206 confirms the top.

If however, resistance at 4,329 is broken clearly wave 5 of V will extend towards 4,446 which will be the next upside target. 

S&P 500 - Headed for 2,081.85

S&P 500 - Headed for 2,081.85

S&P 500 is headed for 2,081.85 as the first possible upside target 

The rally of the 1,818.90 is clearly impulsive and we can already count five wave up from 1,818.90, but is the top in place? Not likely, when we have the first four waves in place, we can calculate the possible targets for the fifth wave. The first target to plot is where wave five will be equal in length to wave one and red wave (v) will be equal in length to red wave (i) at 2,131.42. 

The next two target to calculate is where wave five will be either 38.2% or 61.8% the distance traveled from the bottom of wave one to the top of wave three and add those two calculations to the bottom of wave four. In this case, that will give us the 38.2% target at 2,081.85 while the 61.8% target comes in at 2,130.73.

So the first target, that we should aim for is at 2,081.85, this could be the final top for red wave (v), but only time will show. If however we break clearly above the 2,081.85 target, then our focus should turn towards the 2,130.73 - 2,131.42 area as the next possible top for red wave (v).

At this point, only an unexpected break below support at 2,002.20 will indicate that the top of red wave (v) already is in place and shift the focus to the downside.  

ASX 200 - Top confirmed at 5,679.50

ASX 200 - Top confirmed at 5,679.50

ASX 200 top confirmed at 5,679.50

Since the March 2009 low at 3,120.80 a major zig-zag correction has been unfolding. You might ask, why this is not just the first three waves of a impulsive 5 Wave rally higher? The clue is the C wave. Wave A of the 3,120.80 low to 5,025.10 was a strong impulsive rally and was followed by a simple zig-zag correction in wave B, but wave C higher from the B-wave low at 3,765.90 has been slow moving and not as dynamic as wave A, this is what we would expect for wave C of a zig-zag correction, but not wave 3 in an impulsive 5 wave rally. Wave C has taken almost 3 time as long as wave A to cover the same distance as wave A. 

Now that we have confirmed, that the rally of the 3,120.80 low is only a correction, then let's look at the final part of the C wave rally. Wave v of C has become an ending diagonal (overlapping wave one and four, which only is allowed for diagonals). The break below the ending diagonal support-line near 5,510 confirms that wave v of C is over and we should now look for a decline to the origin of the ending diagonal at 4,632.30 over the coming weeks.

When dealing with ending diagonals, there is a time-guideline, which can be a guide for us, when we expect the origin of the ending diagonal to be hit. The guideline states, that it would take only half the time to hit the origin of the ending diagonal as it did to build the entire formation, which in this case means that the origin at 4,632.30 should be hit within 30 weeks or in early March 2015.

However, longer term I will be looking for a continuation lower towards the bottom of wave B at 3,765.90 and lower towards the March 2009 bottom at 3,120.80.

With the long term picture in place, we have a nice roadmap for the short term moves, that should keep us out of trouble for many months to come.  

 

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Ananyavrat
2016-06-24
Hi Surfer,

Super calls !! And analysis.

Bravo for your brexit call !!
Whats next?

Ull need to update all indices!

Ananyavrat
Thomas
2014-05-28
phenomenal new service EWS, I have followed you for 18 months and the exceptional analysis continues unabated! I look forward to the daily updates focusing on the most interesting and potentially lucr...
Roelant
2016-06-26
Hi Elliotwavesurfer,

Your forecast of the EURUSD waves and reversals on Brexit day were spot on! This was not chaos, the crowd followed a pattern!

GBPUSD was abolutely 100% too!Unbelievably accu...