When we first wrote about Denmark’s Copenhagen 25 three years ago, the index was hovering just above the DKK 2000 mark. That price was the result of a more than 100% rally from the Covid-19 bottom in March, 2020. In other words, the index had more than doubled in less than two years. Instead of blindly extrapolating the recent past into the future, however, we decided to take a look at its daily price chart. The pattern we found there spared us the suffering in the 2022 bear market.

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We shared this chart with readers exactly three years ago, on November 18th, 2021. It revealed that a five-wave impulse pattern, marked (1)-(2)-(3)-(4)-(5), had emerged from the 2020 bottom. According to the Elliott Wave theory, a three-wave correction follows every impulse. So instead of joining the bulls near DKK 2000, we thought that investors should “prepare for a notable three-wave decline to at least DKK 1700.” As the updated chart below shows, we weren’t bearish enough.

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Wave (5) didn’t even exceed the top of wave (3). The bears took over right away and dragged the Copenhagen 25 index down to DKK 1411 in October, 2022. That 30% bear market took the shape of a simple (a)-(b)-(c) zigzag correction with a leading diagonal in wave (a). The following recovery to a new all-time high, in turn, looks like an ending diagonal pattern.

Now, the Copenhagen 25 index only exists in its current form since 2017. Given that it derives from the OMXC 20, which was in an uptrend prior to 2017, it makes sense to assume that it would’ve been in a bull market, as well. This allows us to put the post-Covid recovery into bigger Elliott Wave context. It fits into the position of wave III of a five-wave impulse, marked I-II-III-IV-V.

Wave II was an expanding flat correction, whose wave (c) stands for the Covid-19 crash. The 2022 bear market is then labeled as wave IV and the ending diagonal pattern, whose lower line has just been broken, must be the fifth and final wave. If this count is correct, the bears have plenty of room to run from here. Just as the post-Covid impulse pattern was followed by a three-wave correction, so should be the case with this bigger one on the weekly chart.

The support area near DKK 1600 might slow the bears down and allow for a temporary recovery in wave B. It should not be seen as a ‘buy’ signal, though, because wave C should then drag the price to roughly DKK 1400 again. Maybe even lower.

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