Dax indicators 11.4.2012

Current rebound could go as high as 6850-6860 without breaking the downtrend in RSI.

But most of the stocks are already below their 50 day averages.

MSI is pointing down and still staying at quite high level.

Overbought and sold conditions have easened from their extremes and almost converged. Before the relation is inversed there is potential that index would stay low or decline more.

But seems like investors want to take a little bit more risk currently, so at least we saw short term market bottom.

The selling volume hasn't been special

Volume index hasn't made any new lows.

TRIN was temporarily positive, so the investors were buying advancing stocks (obviously when almost all the stocks were rising...).

Dax indicators and sentiment 22.2.2012

Coming correction

Dax has diverged from it's 20 day price channel and MACD is showing negative divergence. Dax would be expected to touch it's 20 day moving average / rising trend line above 6700-6750. The lower level of price channel is at the level 6400 which is the second price target.

Dax McClellan is again pointing down.

Highly negative TRIN readings show significant selling interest. 

Volume Index is at the level 6500 which could be reached soon.

A sentiment study from Cognitrend reveals that investors are becoming more pessimistic and thus adding their short positions.

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 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.

Dax sentiment and volume 16.1.2012

Current market situation is being led by very low volume. In the other words, most of the investors are not willing to buy or sell. Usually, market has tendency to go up during these kind of situations.

During last 10 days, only 2 days has got more advancing stocks than declining stocks.

According to TRIN studies, the market has more volume on declining stocks than advancing stocks.

The volume index hasn't been rising lately, so either the prices has to come down or someone should start buying stocks heavily.

This seems a little bit difficult situation, so it would be better to stay on sidelines and wait. It seems that the probability for a downside correction has risen. During next 3 months we could see lower levels than where we are at the moment. It is also an option expiration week in the US, so during the low volume, it will be easy to play many options worthless.

Dax sentiment 10.1.2012

The volume has been extraordinary low. Usually volume drops at these levels only during holidays. So, no-one wants to do anything. Big investors are not willing to sell nor buy. However, on Wednesday we saw volume spiking above it's 10 day EMA.

... but negative TRIN reveals that most of the volume was allocated on declining stocks.

...and it is a little bit annoying that stocks are behaving like this would be a market bottom. Previous times this condition has implied consolidation or decline ahead.

Overview: Gap up + positive daily candle + volume accumulation (even the volume has been low) + negative TRIN = bearish sign? We have seen gap ups lately, but none of them has been runaway gap. Taking into consideration that there will be heavy resistance at 6170-6190 and under these conditions gap up could mean exhaustion gap.

Seems like Dax would need to go lower first if we want to break up. Only very positive news from the economy would give Dax enough interest to go upper levels near 6400.

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.



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.

Dax 16.9.2011

Seems like a rebound, finally

It doesn't matter if you are bear or bull, but prolonged situations get people bored. Now it seems that some people are tired of this pessimism.

My favorite indicator for buying and selling equilibrium reveals clearly that the bear camp is decreasing. Bulls need some more power to take index levels higher. We will watching the green line from below chart very closely. Usually these lines have quite much inertia, so it is very likely that we see them connecting each other, which means positive time for index.

 

The cycles indicator tells the same story.

Trin value is increasing, which is positive sign.

52-week new lows reached almost the same levels than during Lehmann collapse. Even the whole situation reminds the same. So, rebound, and it is still possible to see even new lows being tested.

Fewer and fewer stocks were dragging the index lower. Now it would be time for a broader based short term bull market.

I have been calling the rebound for some time now. This rebound could not have to do anything with real economy, but who cares. I hope that the investors could get more positive.