Dax sentiment / technical analysis week 41

Up it is

Nothing much to say. The market is rising as expected. The bullish signs have been clear for couple of weeks now.

Dax overbought and oversold signals show clearly how the selling has decreased dramatically and buying has started to increase. The below graph show how the inertia between these two is currently on it's way to bring these into equilibrium. So, we expect higher high ahead for the index. After all, the seasonality is on bulls side for the rest of the year.

The below graph reveals the development of individual stocks compared to the index. As you can see, less and less stocks are performing better than the index, which is desirable outcome. The market is still working like it is supposed to work!!! Currently 40% of the stocks has performed better than the index during last 20 days. Usually this ratio could come down to 30%, at least, before the market will start to establish a short term top.

Statistics about Dax down more than -15% from previous week's high

During this week Dax has dropped more than -15% from previous week's high.

In history we have seen such drops mostly in bear markets, but there have been few cases also during bull market as you can see from a picture above.

I wanted to find out if bulls have had any edge following this kind of crazy weeks.

Statistically next week's have been looking like following for bulls:

	1 week	2 week	3 week	4 week
median	-0,99 %	4,32 %	6,37 %	5,06 %
average	1,99 %	2,84 %	4,59 %	3,88 %
probability	47,62 %	61,90 %	76,19 %	61,90 %
max	16,12 %	18,50 %	22,12 %	21,40 %
min	-10,16 %	-12,05 %	-17,25 %	-22,12 %

The probability for rebound is not very promising even the averages and medians seem very high. If see any rebound, we should mostly expect it during the next 3 weeks. After 3 weeks, the bulls have lost the edge.

Next we want to know where the next week's high have been according to this week's close.

	high
median	6,31 %
average	7,58 %
probability	95,24 %
max	18,47 %
min	-0,28 %

The same statistics for low compared to this week's close.

	low
median	-4,67 %
average	-4,71 %
probability	85,71 %
max	2,38 %
min	-16,04 %

Statistics for possible lower low:

	low
median	2,96 %
average	2,15 %
probability	38,10 %
max	16,95 %
min	-14,01 %

According to history, lower low has only 38,1% succeed rate. It shouldn't surprise to see strong rebound, but it looks like very volatile next week. I would buy speculative longs from these levels.

Dax 4.8.2011

Extreme condition


27 of 30 dax stocks are trading their 20-day lows. We haven't seen greater amount than this, so we expect a pullback of some kind.

Accumulation/Distribution reveals very very oversold condition. In history, we have seen quite strong short term rebound from such state.

Our own dax indicator also reveals very high oversold condition which we have seen previously during 2008 bear market. We could see +5-10% rebound during next 2 months.

Trin SMA(10) reveals interestingly weakening down-trend.

16 of 30 stocks are trading better than the underlying index. We are expecting a tradable bottom soon.

Cumulated volume index hasn't made new lows even the price index has.