Elliott Wave Analysis of the Dow Jones Euro STOXX 50 by Sid from ElliottWavePredictions.com. Click on the charts twice to enlarge.
If you aren’t familiar with the Dow Jones Euro STOXX 50 Index, it is essentially the European equivalent of the Dow Jones Industrial Average in the U.S. It consists of 50 select blue chip stocks across 12 Eurozone countries.
The technical situation for the EuroSTOXX50 is a bearish one. Here’s the evidence from the weekly chart:
- The recovery after the crash from June 2007 through March 2009 is choppy, overlapping, corrective, weak, and appears to have carved out three relatively equal waves.
- The rally from the September 2011 low has nearly reached length-equality with the initial rally off the March 2009 low (through January 2010), but has moved to the upside at a less aggressive angle.
- The weekly MACD has been showing divergence since the 4th quarter 2013 highs.
- Price is stalling just under a confluence of Fibonacci targets: Primary (burgundy) Y would equal Primary W at 3207, Intermediate (black) C would equal intermediate A times 2 at 3199, and the 50% retracement of the entire 2007-2009 decline is at 3185.
- Internal wave structure from the Intermediate (black) wave B low in June 2012 appears to have completed, or nearly completed 5 waves up.
On the daily chart, while the January 15 high of 3178 may be the top, it is possible that wave 4 pink is incomplete, and is carving out a triangle. These two potential scenarios are identical to the two waves counts discussed in the last post regarding the EUR/USD currency pair.
Hurst cycle analysis may be providing a clue as to which scenario to expect. The next cycle low expected in EuroSTOXX50 is due on or near February 20. This might be green wave 1, or could be the end of the pink wave 4 triangle. Then, a 56.3-day cycle top is expected between February 25 and April 5. In my opinion, March 7 is the highest probability target date for that cycle top, because March 7 has repeatedly appeared as the likely topping day in Hurst cycle analysis of several other correlated items I track. If price moves aggressively upward into early March and makes new highs, it is likely a terminal thrust from the pink 4 triangle. If upward movement is less aggressive, and cannot make a new high above the end of pink wave 2 (if it is complete), it could be a green wave 2, thereby forming a very bearish nested 1-2-1-2, with wave 3 of 3 to the downside coming next.
Regardless, if either of these wave counts are correct, the major stock indices are going to have lousy 2nd and 3rd quarters this year. (Note that, according to my interpretation of longer Hurst cycles, there are significant clusters of cycle bottoms due in July, and again in Oct/Nov of this year). And, since European stocks, U.S. stocks, European currencies, and Gold seem to be moving in lock-step recently, (a developing sign of an “all-one-market” bearish condition), they are all likely to move to the downside together, unless the current correlations break apart.