Dax indicators 10.4.2012

Even the short term market bottom could be near I still have 3 different algos pointing to have an open short position for Dax.

Dax cycles down.

Dax beta down. 

Dax overbought vs. oversold converging.

Dax 20 day performance down.

Dax RSI down.

Dax indicators 4.4.2012

Dax closed with 30 declining stocks measured from close and 30 declining measured from open. Averagely there are about 4 similar cases during year. Statistically this hasn't been very good sign for the next day. There is 86% chance (average -1.86%) that we close lower than 6784. 6.3.2012 we closed only 0,57% higher, so if the day will be up, the potential is limited. Yesterday's trading signals suggested to short FRE and FME, because usually high beta stocks lead up if we will see strong rebound.

Dax hourly chart looks bullish with DMIs at the extreme levels, RSI and MACD going to point up.

However, in a longer perspective Volume Index has dropped more aggressively than the prices...

...and here you can see how the prices behave when Volume Index has fresh 20 day low.

Investor risk appetite has been dropping since the middle of March.

Stocks have broken their 50 day moving average quite quickly.

20 day performance still seems surprisingly positive, but it is expected to change. 

Dax cycle is going down. Would it finish the down cycle this time? 

McClellan Summation Index is also in a downtrend.

Dax RSI indicator indicates that the index has had stronger downside momentum than the actual stocks. According to my studies, we could have a tradable market bottom for longer term swing traders within a month.

Dax should have upper target near 6870-6880, but it would be great opportunity to add some short positions. The downside target could be 6750, and pessimistic target 6658.

Dax indicators 29.3.2012

Dax futures are currently trading above 6940, which is nice with yesterday's trades. Indicators are currently very mixed depending on the time frame, so I should be careful not to take too much bearish or bullish outlook and concentrate only short term outlook.

Even some indicators are bearish mid term, it is hard to believe in any bigger correction before we get 52-week lows. Currently we are having zero lows. Another (and likely) possibility is that the stocks are currently so highly correlated, that this kind of behaviour isn't needed.

Dax Volume Index is giving a possibility to drop above 6500.

20 day highs-lows ratio is still on the bullish side.

Dax Cycles is a little bit bearish.

6974 is still an important resistance today, and if Dax manages to climb above it then climb above 7000 should bury bear's hopes (again). Although, today's low could be near 6868, but still above yesterday's low. If today is a strong up day, some of my reliable indicators will also turn from very oversold condition, thus indicating bullish Monday. We will see.

Dax indicators 27.3.2012

Dax still has negative divergence with indicators. Even the divegences haven't been working out lately, this should be treated with cautious.

Dax had two 52 week highs, which is a bullish signal. 

20 day cycle seems cautiously positive, even the latest performance hasn't been clear.

Dax Cycle Indicator is based on 2 month price behaviour. Nor does this indicator gives clear direction. 

Dax Volume Index has lately acted in unison with prices.

Today's index setup will be to close the long position with index at 7170 or near close and then take short position for two days.

Dax indicators 20.3.2012

Dax still has a negative divergence with RSI and MACD, which could make momentum investors cautious. Break below 6970 would confirm the divergence and lead Dax to 6600. If Dax manages to stay high, 7400 maintains as an intermediate target.

Volume index has been rising and almost climbed above July highs. We need to watch this carefully for a hint of level 7400 for Dax.

Overbought - oversold indicator resisted it's normal inertia which would have taken Dax to lower levels. Now we are back in uptrend.

 Dax 20 day highs vs. lows also indicates uptrend.

McClellan Summation Index indicates uptrend.

The only negative indication is investor beta, which is currently indicating risk aversion even it is still above positive level 50.

Overview: We haven't had any major negative news issue lately, so remain cautiously positive and bullish biased.

Dax technicals 10.2.2012

Overbought condition easening

Dax dropped from the ceiling of 20 day price channel. Usually this has meant at least testing of a 20 day moving average which lies below 6600 near rising trend line. If Dax breaks down below the rising trend line and 20 day moving average, it would add the probabilities to test the bottom of price channel near 6200.

Now we have 3 stocks with 20 day performance negative.

The amount of overperforming stocks have been increasing. Usually this hasn't been a good sign (in despite of the latest performance which has been exceptional).

Clearly we can see that investors have interest to reduce the beta (one month beta) of their portfolios. The latest developement has been risk averse and could signal further drop in the prices.

TRIN was negative, thus revealing that declining stocks got bigger part of the trading volume. 

Volume Accumulation/Distribution dropped below -500, which revealed heavier than average selling.

Dax volume index seems to be reacting stronger on the downside than the price index.

Backtesting results from the history data reveals, that if TRIN is negative, Volume A/D below -500 and Volume Index decreasing, there is 37% probability for a positive next day. Adding that the condition has been extremely overbought, this drop in prices would easen the situation and make it healthier. Anyway, we need to watch the situation carefully, if the Dax decides to drop below 6600 and signal a drop below 6200. 

Dax performance and sentiment week 6

From one extreme to another

Dax investors have been very optimistic in a broader sense, because all the stocks have positive performance during last 20 days.

Rarely, all the stocks have positive 20 day performance. 

Negative divergence with price and volume index no longer exists.

Dax cycles is almost at the all time high reading.

90% of the stocks are 1 standard deviation above their 20 day moving average. This is the highest reading we have seen in the history. 86,7% of the stocks are 1 standard deviation above their 50 day moving average. 90% is the highest reading we have seen. Previously as high reading happened in the end of October.

McClellan Summation Index is almost at the level 36,66 which is the second highest level in it's history. However, 50,27 is the highest reading we have seen so far. 

Normally extreme conditions have tendency to go even more extreme before pulling back. Yet, it is difficult to tell, how long this current extreme condition will continue, but it might not end well.  

Dax sentiment 30.1.2012

We have seen four 52 week highs during last 5 days when Beiersdorf, Fresenius, Merck and SAP have been rising to higher levels. Beiersdorf and Merck are already trading over 30-times their earnings while Fresenius is at 19 and SAP below 16 (according to Yahoo Finance). So, all these four are highly above the average Dax P/E.

Anyway, the volume dropped to 30% from the recently seen volume. The investors just seem to be waiting a good reason to buy or sell even the upside seems to be limited.

20 day highs versus lows is already quite high.

I am watching few indicators carefully to see early topping sings or weaknesses. McClellan Summation Index is based on advance/decline -ratio, and it has proven to be quite reliable indicator. For today, we would need to see 8 more declining than advancing stocks inside Dax if we want this indicator to to decline (ie. 19 declining and 11 advancing).

Dax volume index is dragging a little bit compared to the price index.

Dax sentiment 26.1.2012

Risk/reward

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.