We’ve learned that when a market breaks the .786 retracement from between 2 very outstanding pivots, it will usually proceed to the next 1.272 extension of the same swing as a target. Here’s a 45 minute chart of the September DAX contract:

Click on image to enlarge!

Price has already broken the .786 retracement from the pivot labeled B to pivot C. The corresponding target level lands at 6091. The current swing low is a good spot for a struggle though as price is testing the target extension from C to D, and the .786 support from point A to point C, a larger swing, has yet to be tested. We always need to pay attention to the 1.272 target of the swing into a reversal point (C to D), and that certainly is serving as support at the moment. However, because we’ve already broken support pointing to the target at 6091, it’s more likely that this area will bring a struggle with an eventual breakthrough to downside. The 6091 target is further reinforced with an overlapping 1.618 target extension of the C to D swing.

That’s the next likely point for this market to find support and we may see a debate between the bulls and the bears kick in at that point.

At the moment the strongest resistance on the chart is the 6226 – 6229 zone, .382 of the whole high to low swing, and .786 of the most recent pivot high to the current low. If we see a bounce but the pattern is to maintain to downside? That area should hold.

For more from Mark including his “Chart of the Day”, visit MJBraun.net.