European stock markets are advancing this Monday as the feasibility of a state aid to airlines increases. Likewise, the financial sector also became infected by stock market optimism as individual governments have announced that they will soon ease the virus blockade measures.
The German reference index DAX 30 advances 124.6 pts or 1.19%, climbing up to 10.576.5 pts, while the Pan-European index Eurostoxx 50 raises 27.4 pts or 0.97% reaching 2.860.8 sts.
The German index that groups the 30 most capitalized companies, during this year, accumulates a decline of 19.43% (YTD.) Likewise, DAX 30 advances 32.91% from the massive sell-off that occurred between February and March that led it to collapse to 7,957.6 pts.
The German benchmark, in Elliott's short-term perspective, in his 2-hour graph, shows the advance in a non-directional sequence corresponding to a contractive triangle.
After DAX 30 reached the lowest level of 2020 in the 7,957.6 sts on March 19, the German index completed an expanding diagonal ending pattern in the 8,247.6 sts on March 23. In this way, DAX 30 finished a first structural series corresponding to the wave (A) of intermediate degree labeled in blue.
Once the blue wave (A) was completed, DAX 30 began to develop a bullish sequence corresponding to wave (B) in blue, which is still in progress.
Currently, the German benchmark is moving in a lateral sequence that obeys an internal structure of a contractive triangle, which belongs to the Minor degree labeled in green wave B.
Considering that the price action is surpassing the upper line that joins the end of waves ((b) and ((d)) of Minute degree in black, we can conclude that DAX 30 is initiating the wave C in green.
According to the textbook, in a corrective pattern divided into an internal sequence of three waves, the wave C must contain five inner segments.
On the other hand, wave C may be similar to an impulsive structure, or it may develop as an ending diagonal pattern in where its internal waves are overlapped one each other.
In conclusion, considering that DAX 30 should develop a bullish sequence subdivided in a five-wave structure corresponding to wave C of Minor degree, which should lead to new highs, our preferred short-term positioning remains on the bullish side.
However, in the long-term, considering that the following path corresponds to a bearish wave (C) of Intermediate degree in blue, our long-term positioning keeps neutral, expecting for bearish indication.
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