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  • Key break here in the 10-year #Treasury yield as it rises to the highest since late June Took out 1.4230 resistance, and the 100-day SMA Eyes now on the 38.2% Fib extension at 1.4775 Also potential falling resistance from March
  • The move in rates after this week’s FOMC has continued and the 10 year yield has pushed up to a fresh two-month-high. Get your market update from @JStanleyFX here:
  • S&P 500 contending with its proverbial ‘line in the sand’ as bulls and bears battle for directional control. How we close/trade around the 50-day moving average could serve as a noteworthy bellwether for risk trends headed into next week. I remain cautious below ~4,480. $SPX $ES
  • USD/JPY trades to a fresh monthly (110.57) amid the pickup in longer-dated US Treasury yields, and the exchange rate may stage a larger advance over the coming days. Get your market update from @DavidJSong here:
  • US yields continue to climb, with the 10-year Treasury yield trading above 1.45% $ZN $ZB
  • $USDJPY bull thesis appears quite constructive. Technicals show topside breakout above trend resistance following a period of consolidation. Bond yields providing the fundamental catalyst. Eyes on Aug/YTD highs. A broad-based deterioration in market sentiment poses downside risk.
  • WTI posting another session of strong gains, currently flirting with the 74 handle $CL #Oil #OOTT
  • The New Zealand Dollar’s bullish breakout attempt in early-September was rebuffed. Price action at the end of the month is telling a different story. Get your market update from @CVecchioFX here:
  • So much for that Evergrande recovery. Shares of the troubled Chinese property developer are down approximately -12% today following yesterday's impressive rally (biggest in a year)
  • Retail trading platform Robinhood announces hire of new Chief Compliance Officer amid regulatory scrutiny
Elliott Wave Analysis: Dow Jones, Nasdaq, and Dax 30 Dive Impulsively

Elliott Wave Analysis: Dow Jones, Nasdaq, and Dax 30 Dive Impulsively

Jeremy Wagner, CEWA-M, Head of Education

Dow Jones, Nasdaq, Dax 30 Elliott Wave Analysis Talking Points

As investors search for reasons why the largest correction in years is occurring, traders look to the technical charts. Our Elliott Wave analysis for Dow Jones, Nasdaq, and Dax 30 shows a wave picture that is likely incomplete to the downside.

Dow Jones Industrial Average Sticks on Top of Elliott Wave Channel

Many times Elliott Wave impulses form a price channel by connecting the extremes of waves 2 and 4 and projecting it over wave 3. Dow Jones Industrial Average has rallied past the upper channel line in a blow off top. Returning inside the Elliott Wave channel can be a signal that the rally is over. Dow Jones Industrial Average is hovering near the channel line so continued weakness in the market may confirm the top is in.

If DJIA is successful in returning inside the Elliott Wave channel, then the next level of support enters the picture near the lower channel boundary near 20,000. If this area fails to contain DJIA, then the next level of support is near the fourth wave extreme at 15,500.

Dow Jones Industrial Average weekly Elliott Wave chart analysis.

Nasdaq Reverses at Elliott Wave Channel High and Targets 5300

As discussed above, the Elliott Wave channel can offer target zones within an impulse wave. Nasdaq has rallied since 2009 in a five-wave impulse reaching the upper channel line. There is a small internal support trend line Nasdaq is trying to pierce. If it is successful, then continued weakness is anticipated to lower channel support near 5300.

If Nasdaq cannot find support at the lower channel line, then we will look for continued weakness to the fourth wave extreme near 3900.

Nasdaq weekly chart with Elliott Wave analysis included.

Dax 30 Cannot Reach Its Elliott Wave Channel Midline

Notice the difference in Dax 30 relative to Dow Jones Industrial Average or Nasdaq. Dax 30 could not rally to the grey dotted line that represents the midline of the Elliott Wave channel. This is indicative of a very weak market.

The lower channel line may provide temporary support near 11,500. If Dax 30 is able to rally to new highs from this level, then we can count it simply as a wave 4 (the alternate shown on the chart). If Dax 30 breaks outside of the Elliott Wave channel below 11,500, then we will look at the fourth wave extreme near 8700 as the next level of support.

Dax 30 Elliott Wave chart analysis.

The bottom line for all three markets noted above is that absent an immediate print to new highs, this bearish sequence appears incomplete and trade make take place to lower levels in the coming weeks.

Elliott Wave FAQs

What is Elliott Wave Theory?

Elliott Wave Theory is a trading study that identifies the highs and lows of price movements on charts via wave patterns. Traders often analyze the 5-wave impulse sequence and 3-wave corrective sequence to help them trade strategically. We cover these wave sequences in our beginners and advanced Elliott Wave trading guides.

I hear that many traders struggle with profitability, why?

Regardless of the style of analysis, many traders do lose money because they do not take the time to study the market and the effect of leverage. At DailyFX, we have studied millions of live trades and boiled our study down into a Traits of Successful Traders guide. You will find how leverage and human nature affects our trading so you can be better prepared for the next correction.

Elliott Wave Theory can be applied to a variety of highly liquid markets. FX is one of my favorite markets to apply the Elliott Wave principle. Learn more about trading FX with this guide specifically designed for you.

---Written by Jeremy Wagner, CEWA-M

Jeremy is a Certified Elliott Wave Analyst with a Master’s designation. These articles are designed to illustrate Elliott Wave applied to the current market environment.

Communicate with Jeremy and have your shout below by posting in the comments area. Feel free to include your Elliott Wave count as well.

Discuss this market with Jeremy in Monday’s US Opening Bell webinar.

Follow on twitter @JWagnerFXTrader .

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.