The German DAX is testing an area we marked as resistance in our June 9 post. Although we are presenting a slightly different Elliott wave count in this post versus our earlier one, the current area still offers the strong possibility of a downward turn.
Regardless of whether the decline from 2015 is treated as an impulsive wave [i] or a corrective wave [a], the bounce up from the February 2016 low appears mature as either a wave [ii] or [b].
If the index recognizes resistance as we expect, then the next move should be a strong, impulsive downward wave [iii] or [c].
Another factor favoring a downward turn is the behavior of the adaptive commodity channel index, shown at the bottom of the weekly chart. As the indicator rises from negative territory to test the zero line, we are alerted to the possibility of a turn to coincide with the test.
Because the rally from 2012 to 2015 broke out of a converging triangle pattern, the rule-of-thumb target for a decline is near the vertex of the triangle. That could take the DAX somewhere near the 5000 to 6000 area. However, nearer-term targets for a decline include a retest of the February 2016 low at 8717 and then an area near 7800.
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