Dammit – this post took too long to prepare – DAX is back below 6900 as I type this.
[UPDATE: it popped back above 6900 after I posted the post, so 6900 is a valid entry]
Anyhow: trade logic is as follows: do you think that all of Germany’s listed-stock problems go away even if the professional bullshit-artists like Draghi and Monti manage to force through some or other rescue fund for the incompetent Southern Europeans?
And when (note: I specifically did not write “if”) the problem spreads past Spain and Portugal, and ‘nek minnit‘ everyone’s talking about how France‘s CDS spreads have blown to new wides (and that’s coming, people)… what then?
Europe is done. The DAX should be about 500 points lower than it is, and heading downward. There is nothing that can be done to rescue Spain or Portugal or France’s public finances – when all there is to fund it is that increasingly-unwilling labour of Germans.
The MarketMentat Index Workbench enables a systematic and detailed analysis of the broader market; assessing the investment and speculative merit of entire sectors and market capitalisation strata is not just an interesting exercise – it can also provide an early warning for individual stocks.
Within the Index Analysis section users can examine how different sectors have performed over various timeframes, as well as examining the composition of the index (both in terms of its components, and in terms of the way in which component stocks contribute to the valuation merit of the overall index.)
The most important tool, however, is the ability of users to closely examine market breadth. Breadth analysis is a critical component of an analytical approach that goes beyond price-action and fundamentals; a market that is trading outside of fundamental parameters will usually give breadth-based signs of reversal before it gives significant technical signs of a trend change.
When markets are outside of fundamental valuation ranges, they are primed for reversals back towards ‘fair value’. Breadth Analysis helps give warning signals of impending trend reversals. Key signals to watch for include:
Cumulative Breadth Failures in Leadership Indices
Imagine a situation in which a specific sector is ‘leading’ a broader advance – it’s the sector that is doing the’heavy lifting’. It may be the mid-caps, it may have captured the public imagination. If cumulative index breadth contracts as the index continues to advance, you have a signal that the index advance is becoming centred on fewer and fewer stocks.
Overall Market Breadth Reaches Extremes in Asymmetry
In a sustainable advance, the majority of stocks will be rising, and market volume will, overall, be tilted towards the advancing issues. However when the market enters a period of emotional extreme (usually at or near tops or bottoms), breadth will often become massively tilted to one side or the other. This is also a ‘heads up’ to be on the lookout for a potential reversal.
The MOST Detailed breadth Statistics in the Australian Market
We’ve compiled comprehensive market breadth statistics for every ASX Index (‘Headline’ Indices, GICS Sector Indices and Industry Indices), which include:
- Advance-Decline (absolute and cumulative);
- Advancing/Declining Volume;
- Up Days/Down Days;
- Average Gain/Loss by Sector Component;
- and a couple of other measures besides.
These are available for rolling average periods from a day to a year. Our Daily Breadth Summary gives breadth for the week, the month-to-date, and year-to date, both cumulative and absolute.