It's been a turbulent start of the week for european indices. DAX for starters is breaking the supportive upward trendline and has most probably finished wave II. DAX has topped near 61,8% retracement and in a 3 wave pattern as depicted in the chart. A new impulsive move downwards is expected in DAX in the comming weeks.
The situation is similar in the Spanish IBEX and the Italian MIB. Both indices have made upward overlapping moves. This pattern is the main characteristic of a correction and now that the downtrend resumes, I'm afraid things are going to get very ugly unless there is some constructive political intervention.
Spain is following the 'Greek successful' recipe of budget cutting and speeding the growth slowdown. Italy is next. Techically speaking both indices are breaking short term supports while IBEX makes new lows relative to June 1st low. MIB after back testing the broken support line is also making lower lows relative to June 1st.
Markets have the potential to move a lot lower and their charts remind me where Greek stocks were 2 years ago. Of course Germany and France won't remain unaffected by this situation and are prone to big declines also. The domino will certainly have effects across the atlantic and what remains to be seen is how and if officials are going to react and take necessary measures. Our wave counts on US and European markets are going according to our roadmap.
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