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 2.3.2012

Ascending triangle (bullish) or Rising wedge (reversal/bearish) in the forming?

Break out from ascending triangle would set the upside target to 7300. However, ascending triangle would need a volume contraction, which hasn't happened at the time. Other possibility could be rising wedge, where Dax could still rise above 7100 and then fall. Anyway, we will be a little bit wiser on Monday when Dax should have two options: either gap up near 6970 and then break above 6990, or gap down and close below rising trend line and below 6900, and thus increasing the odds for a reversal.

Dax cycle has been pointing down for a while.

McClellan Summation Index has been pointing down for a while.

More companies have performed negatively during last 20 days.

Dax volume index has negative divergence with prices.

Riskier companies (TecDax, Small Cap Dax) with high beta underperformed during last week.

Dax sentiment week 47

Dax got 3 new 52 week lows when Commerzbank, Daimler and Lufthansa fell to the their lowest levels.

Dax cycle is clearly pointing to lower levels and we probably have to wait 1-3 months to see the market bottom.

As we have seen, the inertia between oversold and overbought usually has been working well. This time is no exception. So, lower levels for the index expected.

Dax McClellan summation index began to fall around zero level, which is quite bad news for the index.

Dax volume index is also pointing to lower levels.

Dax sentiment week 39

Positive signs

We have seen some positive signs lately on last days. Opening gap on thursday, statistically positive day on Friday, and continuation of these bullish patterns on Monday. On Monday, we already saw the first crossover of 50 day moving average when Fresenius Medical Care reached it's 20-day high. After 29.7. all Dax stocks have traded below 50-day moving average.

Although, Beiersdorf and Fresenius SE dropped to new 20-day lows, the technical signs have been more positive than negative. 30 percent of Dax stocks are already above their 20-day highs, which seems bullish for short term.

Indicator for measuring oversold - and bought is still in quite extreme condition, since buying is yet lagging. The expectation is, that the condition will recover to the balance. When green buying will began to show more positive development, the price index (Dax) could quite quickly recover to higher levels. Anyway, we still need a few positive news to have the impact.

Seasonality is bullish biased for the end of the year. Last four weeks have been negative biased since 1990, and the probability for positive week has been about 40%. The seasonality for the rest of the year gives hope for bullish investors.

The average returns have been more positive for the rest of the year.

The volume index, based on invidual stock volumes, seems to be syncronised with price index. As you can see from the aboce graph, volume index began to show negative divergence already in last May making lower highs and lower lows. At the same time the price index (Dax) was trading in a range. Recently the volume index hasn't dropped below the level of June 2009.

Technical indicators are showing positive divergence for short term, especially RSI. Daily chart gave positive signals last thursday (exhaustion gap), friday (hammer candlestick), and monday (bullish continuation). However, long term picture is negative because of negative and downtrending TRIX and MACD.