Monday, October 31, 2011

Dax weekly sentiment 44

Dax has found some resistance

From technical perspective it seems that after completing the upside targets, Dax has found resistance around level 6400. In a future Dax could be consolidating/ranging between 6000-6400.

Overbought/sold indicator has reached extreme level after selling has dropped dramatically. It doesn't need any extra efforts to forecast this to reverse in a future.

Dax cycles indicates that we don't have much room for the upside, so we will see a consolidation or a pullback.

20 day high vs. low ratio is also in a extreme overbought condition. Usually this high level has marked at least a short term top.

90% of Dax stocks are 1 standard deviation above their 50 day and 20 day moving averages. Again we are in a very overbought condition that won't last long.

Dax volume index led the price index up and now it has confirmed the current level. No divergence at the moment.

Tuesday, October 25, 2011

Dax weekly sentiment 43

Higher close reached, and now a little bit cautious

Ok, now we got Dax to close above 6048.

Since, TRIN indicator SMA(10) has turned negative, it would be good idea to remain a little bit cautious and reduce the leverage in long positions.

However, 20 day performance of high vs. lows is positive. This ratio has been positive since 5th October when Dax closed at 5473. So far, lower close for the index is not very probable when this ratio is positive. According to my studies the average close-to-close return has been 0,06% when the indicator is positive two days in a row, while the average return has been -0,03% when the indicator has been negative two days in a row. When the indicator turns negative after being positive, the average return has been -0,36%. Thus, according to this indicator, the odds currently favor bulls as long as the ratio remains positive.

Overbought and oversold conditions has been diverging for some time now. It is impossible to say in advance when these indicators start to converge again. But when this will happen, the index will again fall.

We managed to call the bottom a little bit early, but have been enjoying the bull ride. We will remain in bullish trend as long as it takes. The Dax overbought and oversold indicators has still room for the index go higher levels. However, watch carefully 20 day highs vs. lows.

Wednesday, October 19, 2011

Dax sentiment week 42

Higher close ahead

Dax has traveled couple of weeks and tried to break-up through 6000. Anyway, the technical upside target has remain the same even the road has been quite choppy.

One of the most reliable indicators for short term cycles has been overbought/sold indicator calculated from invidual stocks. The indicator and the inertia didn't fail when the equilibrium was reached, and the index surged like it was expected to do. 

Cycles indicator has surged to positive level, which is short term bullish signal.

Dax TRIN indicator has been peaking high numbers which indicates contrarians aggressive buying.

 Dax Volume index made higher high compared to the beginning of 2010. Thus, it is expected the index to close also higher than 6048.

20 day relative performance of individual stocks compared to index has also decreased to below 40%, which was expected. If this is a rebound, this ratio should start to surge around 30%. Then it is time to be less aggressive bull.

Overall, the market psychology still works as it should. Buy when everyone is selling, but try to buy at the bottom. And sell at the top. Now we are waiting the top.

Thursday, October 13, 2011

Dax sentiment / technical analysis week 41

Up it is

Nothing much to say. The market is rising as expected. The bullish signs have been clear for couple of weeks now.
Dax overbought and oversold signals show clearly how the selling has decreased dramatically and buying has started to increase. The below graph show how the inertia between these two is currently on it's way to bring these into equilibrium. So, we expect higher high ahead for the index. After all, the seasonality is on bulls side for the rest of the year.

The below graph reveals the development of individual stocks compared to the index. As you can see, less and less stocks are performing better than the index, which is desirable outcome. The market is still working like it is supposed to work!!! Currently 40% of the stocks has performed better than the index during last 20 days. Usually this ratio could come down to 30%, at least, before the market will start to establish a short term top.

Thursday, October 6, 2011

Dax sentiment week 40

Contrarians push for a stock market rally

Selling has decreased continuously as can be seen from the above graph. It is still expected that buying would wake up investors interest. Soon we could be in a good phase of optimism. The law of inertia usually brings the green and the red line together and that is about to happen sooner or later. When we see green buying indicator increasing, the index could surge strongly for a while.

The individual stocks are still broadly performing better than the index. Usually this has marked the short term market bottoms.
 Yesterday, we didn't see any 52-week lows, which is a good sign.

Dax short term technical analysis 6.10.2011

Short term bullish

The gap statistics couple of days ago has proven to be very valuable. The gap downs have been quite bullish signals for the next day. Anyway, technical picture doesn't give much valuable information, even the short term view remains bullish.