***** Technical Analysis (January 16)****
The market powered ahead on heavy volume again, with the Nasdaq leading the way as smaller cap stocks which are more speculative made huge gains today and for the past 2 weeks. Blue chips also rose but the largest of the blue chips have lagged the technology and growth stocks. The largest of the growth stocks, such as those in the Dow 30 industrials, are too large to be considered growth stocks anymore. Value and cyclical stocks have also been weaker than the Nasdaq growth and smaller cap stocks.
The technicals are strong enough now with the heavy volume to bring the Dow at least to 11,000 in the next 1-2 weeks, and the Nasdaq to 2200, and the S&P 500 to 1170. The Dow ultimately could reach 11,250 in the next month. There will be dips and pullbacks along the way.
We could see a top in late January-early February, followed by a drop in February and then another rally into March or April, for a double top. Over half the time there is a double top, just as there is usually a double bottom. But we have to wait and see.
What is clear is that the market tape is telling us that the positive momentum is strong and the technical indicators will take time to unwind and to eventually become bearish.
The market is short term overbought obviously, and is getting overbought in the intermediate term as well.
Sentiment indicators (e.g. VIX & VXN) are indicating that we are historical times in that there is wild bullishness among investors. In bull markets that can continue for months, and in fact, there has been strong bullishness for months, such as AAII and advisors.
While the jury is out, I believe that until proven otherwise, we remain in a secular bear market in which we are seeing a cyclical bull market that allows for making money on the long side for traders and nimble investors.
But watch for negative divergences in the months to come which could portend large pullbacks, and eventually this year, the reversal of the major trend.
Gold and silver have been declining sharply for the past week and are likely to fall to at least $400-$402. Support below that is at the prior high range of $388-$394, but we might now reach that, depending on how far the USD rises to.
The USD is probably having a technical bounce rather than a new bull market. That bounce could end in the 88-90 level in the futures price. Then lower prices would be ahead for the USD in mid-late February which could land it in the 80 area by March or April
The bond market is also enjoying a technical rally but may have a lesser chance of having staying power than the USD as there are many pressures on rates rising now.
The energy complex has been in a high range, except natural gas which has had a large correction. Crude oil remains above $30/barrel on each dip/pullback, and will likely have a high range of $36-$40/barrel later this year, with the summer season likely to increase demand.
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.
Dr.Bob no longer hosts Stocktimers meetings on Sunday nights at AOL. |
