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.
