***** Technical Analysis (for January 10)*****
Technically the bulls need a heavy volume rally to lift the Dow above 9077, Nasdaq above 1521 and the S&P 500 above 965 in the next week or two, otherwise, the bears will probably take control of this market.
The Nasdaq and NYSE McClellan Oscillators had a change less than 4, so we can expect a large market move within 4 sessions, but the rule does not tell us in which direction it will be in. If good news comes soon, then that move may be up, but without a strong bullish impetus, it will be down because the technicals favor the downside now.
In the last half of November, it appeared to me that a top was imminent, and finally I wrote about the week of Thanksgiving as possibly being toppy. Now the market looks toppy again, and the top may have been made last week or will be made by mid-week this coming week. In either case, the beginning of a new leg or wave down may be starting soon.
The Nasdaq TRIN was a very positive .40, with a/d of 17/14, up/down volume 3/1, indicating moderate accumulation, but on only 1.65B shares. The RSI rose to 60.1, while the MACD, Williams%R, DMI, CCI and Acc/Dist are giving positive readings. The Money Flow remained neutral while the Aroon improved to neutral.
The Nasdaq McClellan Oscillator rose just 2 points to +22 while its 10% index is positive. The stochastics are positive, crossed up, but overbought in the near term. The index has rallied above the 200 dma (1434) but it has done that a few times during this bear market only to fail miserably soon afterwards. Dow Theory doesn't like rallies rising above a declining 200 dma.
The NYSE TRIN closed at a positive .76, with a/d of 17/16, up/down volume 4/3, indicating a lack of accumulation, on light volume of 1.5B shares. The McClellan Oscillator was +20, a far cry from its recent high of over +40.
The VIX and VXN have MACDs that are indicating negative divergences and both are nearing low levels usually associated more with market tops than market bottoms. The put/call ratio's MACD is quite negative. Advisors according to Investor's Intelligence are still more bullish than bearish, which is negative for the market.
The Dow did close above the resistance level of 8770, but it has not come close to 9077 or 9043 as it can not seem to sustain a multi-day rally.
It appears that the institutions are not committing much money to accumulate stock while there are so many geo-political uncertainties and extremely high valuations for stocks. Also, they probably are wary of the declining U.S. dollar and rising gold prices.
The market may muster up another rally this week but if it lacks stronger volume and more staying power, it will fail once again and we shall see a downdraft in the market start, with a declining market for the next 2-3 months. A retest of the bear market lows is highly likely this year and there is no assurance that they will hold there.
But first things first, and we need to see if the market can take out resistance at 9043/9077 and 1480/1521 on the Dow and S&P 500, respectively in the very near future. Or if we will see a feeble bounce this week, and then an acceleration to the downside. Bearish divergences and toppy indications and chart patterns imply the latter.
Dr.Bob's commentaries are not to be construed as recommendations to buy or sell stocks, options, or ETF's as Dr.Bob is not a Registered Investment Advisor. Information and data provided here is believed to be reliable but cannot be guaranteed to be accurate. Always do your own research and due diligence before investing or trading. Remember that Technical Analysis can change by the day, and as such, one day's TA may not be the next day's TA interpretation.
Dr.Bob's mission is to teach Technical Analysis and demonstrate a structured approach to Market Analysis, for position and swingtrading.
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