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Nikkei and STOXX Facing Resistance


The European index looks like it could be the leader off of an April high.

The Nikkei 225 (INDEXNIKKEI:NI225) index is still sitting right at the 14520 resistance level cited last week, where price should turn back down based on Elliott Wave analysis in a c-wave of iii if the red count is playing out. However, with only minor negative divergence -- and no clear indication from price that it intends to head south -- it's difficult to have any confidence that the red count is going to follow through from here.

Instead, the blue count appears to have a slight edge and can take price back to test the March high. The structure that the blue count is likely to form on that path is still a little questionable, though since the way that I have it currently labeled would project higher than the March high -- it may be adjusted as more of the pattern fills out. Either way, I would like to see that gap support around 14200 hold on any pullback in order to maintain confidence in the blue count.

Out of the European indices, the Euro Stoxx 50 (NYSEARCA:FEZ) looks the best as a potential leading diagonal off the April high. Such an interpretation would actually fit on the daily chart if we consider that high as a b-wave. However, given the positioning of other charts, we need to seriously consider a new swing high on the way for the STOXX as well.

If bullish, it would likely be within the context of an ending diagonal here as well, but in the STOXX, the ending diagonal could be further along in the pattern and now starting wave v. If that were the case, this would be wave a of 5, and the pullback off the next high would be a corrective b-wave. Under both counts, price should meet resistance between 3135 and 3165 on this move and pull back. Whether it does so in a corrective or impulsive manner will decide between our two counts.

See charts illustrating the wave counts on the Nikkei and Stoxx here.

Garrett Patten is a technical analyst and chief educator for, a live trading room featuring Elliott Wave analysis on market indices and stocks. Patten's focus is primarily on US and international equity indices and demonstrates the capabilities of unconventional technical analysis. His articles appear on sites such as MarketWatch and SeekingAlpha.

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