***** Technical Analysis (for January 13)*****
The market did little today to signal the next move as all indices were basically flat on light volume.
Possible scenarios are:
1) Strong rally on heavier volume taking the Dow above 9077 resistance and Nasdaq above 1521, in a short-intermediate term rally of 2 weeks to 2 months, which will have started January 2. Look for very strong internals, up/down volume, and much heavier volume, for this to occur. Odds of this appear less than 20% now,
2) A moderately light volumed rally, choppy, but taking the Dow towards or to 9000-9077 but failing to break out, and then followed by a moderate to sharp decline for the next 2-8 weeks. Look for fairly strong closes for this to occur. Odds are perhaps higher for this than #1,
3) Not much of a rally this week (choppy at best) and this week ends up being down, signalling the end of the rally from Jan.2, and a retest of the 8250/1320 levels). Look for weak closes this week and weak internals for this to occur. Odds of this are medium, perhaps a little less than #2 but more than #1,
4) Almost straight down from here, with a lower downside target than #3, as Dow 8250 and Nasdaq 1320 won't hold in the next 4-8 weeks, and we have the Dow decline to at least 7900 (or below) in the first quarter. Look for bearish signals from indicators with little relief and for the media blaming bad news for the drop. Odds of this occurring are fair, about like #2.
Timeframe for these are described for this week but could be pushed out until next week if we remain rangebound between 8600-8900 on a closing basis.
For today, the Nasdaq TRIN closed at a mildly negative 1.35, with a/d of 1/1, up/down volume 2/3, on light volume of 1.6B shares. The MACD, Williams%R, DMI (but not the ADX), CCI and Acc/Dist remain positive while the Money Flow and Aroon remain neutral. The RSI is 59.7, almost unchanged.
The index is above the 200 dma (1432), which along with the weekly stochastics and aforementioned positive indicators, gives bullish technicians some evidence for their case. The Nasdaq McClellan Oscillator declined by less than 4, so it is giving a signal for the second day in a row, that there will be a large move within 4 days, and by virtue of the second day in a row for that signal, it should be a very large move.
The NYSE TRIN closed at a neutral .99, with a/d of 17/16, up/down volume 1/1, on 1.35B shares. The McClellan Oscillator was +16 as it too has weakened a bit.
The sentiment indicators are little changed and are bearish on balance.
While the market is overbought on several indicators and some bearish divergences are starting to show up (such as the CCI), it could rally because the selling pressure has not been very strong yet, and the upcoming earnings reports may be fair to good, and used as an excuse to rally this market, especially since there is a lack of news focusing on the Iraq situation right now.
But the technical indications from a 2 week to 2 month timeframe (what I call short-intermediate term) and 2 month to 6 month timeframe (my intermediate term) are considered bearish.
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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