Friday, January 27, 2012

Dax sentiment 26.1.2012


Commerzbank has obviously been the strongest performer during last 20 days.

However, only a little bit over 40% of the stocks have performed better than the index during last 20 days.

Rarely all the stocks are performing positively during 20 day period. Now we have 27 positive performers.

20 day highs divided by lows has been positive too long.

Dax cycle seems to be a little bit high, maybe we are topping soon.

Sales have become stronger lately even the buying has remained high.

Trading volume has been increasing lately.

McClellan Summation Index has been leading the way up. We haven't reached the extreme level yet and anything is possible before the indicator will begin to decline. 

Although, TRIN has been negative already 3 days in a row, which means that the investors have been selling more than buying at these levels.

The moving average of Trin also turned negative. Even it is possible that the market could rise a little bit, the probability of short term market top has been rising. Previous similar cases with Trin has been marked in the below graph.

Overview: at the current situation, the risk for the downside correction is higher than the upside reward. Sentiment has been cautiously bullish for some time, but the economic risks haven't been resolved. The market will become exhausted. So, for now on, during the next 1-2 months we should see correction to 6000, or if the market cannot find any good reason to sell, at least consolidation. It would be wise to step out of long positions or aggressive traders could begin to build their short positions.