Global markets fell about 2% on Germany's Ban

Wuzhen a well preserved historic town from Tang Dynasty (618-907)

Germany announced on late Tuesday strict measures to reduce speculation in Government bonds and bank stocks starting 19th May 2010 and tha ban will last until 31st March 2011. The ban includes the short selling of credit-default swaps, euro-zone government bonds and short selling of shares of the country's 10 most important financial institutions.

Global markets interpret the move as an indication that the financial situation in Europe might be getting worst.

Dow dropped close to 100 points (1%) after first hour of trading.

The drop put the index very close to its lower resistance level.


A drop below the resistance line at about 10,400 or 10,380 for 100% retracement for wave 2, will kill the above hypothesis of having wave (VI), (VII), (VIII) and (IX) and put the wave count in favor of a mega wave II consolidation as shown below as the worst case scenario. I have ruled out a collapse at this moment because from the 2009 March's low, Dow has formed 5 waves (I, II, III, IV and V), so it cannot be a bear market's rebound for the double dips scenario at this moment. A bear market rebound wave consists of either 3 waves or 7 waves but not 5 waves. A mega wave II correction is the worst case scenarior for me at this moment.



Under the mega wave II pull back, the 5 waves down can either be wave 1 or wave A of the mega wave II.

Bursa Industrial Index's wave form will depend on whether Dow can stay above its lower resistance line. I expect the index to follow Dow closely to form either major wave (VI) or going for mega wave II formation.

Wuzhen