DAX - To Lead US Indices Into The Next Wave Down?The German DAX index printed a strange flash dump on Friday and then gapped up today to print what you might call an Expanded Hanging Man candle.
The Hanging Man is somewhat similar to the Shooting Star but the whipsaw is inverted.
Both are considered bearish but Shooting Star is often more immediately bearish.
The Shooting Star is a sudden push up that quickly whipsaws back down - often to strike higher liquidity above.
Whereas the Hanging Man is the opposite - the "trap door" suddenly opens with a quick impulse down, only for it is quickly bounce back up and recover.
In this instance notice that it slumped to strike higher liquidity below previous resistance.
This is a first weave of that liquidity landmark and may be the start of a reversal.
The reason why I said it was "expanded" is that it didn't recover until it gapped up today.
And so we see different candles to the blended candle in the image.
With that gap up it means there is a gap on the week chart.
As I have said many times; high time frame gaps (mostly week gaps) are often Exhaustion Gaps as part of a reversal.
And so we may see that this gap is the beginning of my favourite "Gap-up-dump-down" shakeout pattern.
Current price is only a small distance higher than resistance and so this is an area of higher liquidity; ideal for a reversal.
So I have considered that perhaps DAX is leading US stock indexes - because it has been the most bullish in this area.
And if it starts rolling over at the key liquidity point then perhaps US stock indexes will follow - wherever they are.
I am making this point because neither S&P or Nasdaq are in ideal liquidity zones in regard to ratio.
But DAX making is slightly higher high, is in an ideal zone of liquidity for a pivot.
So perhaps if DAX rolls over in this area then other indexes including US will follow 🧐.
Not advice
