***** Technical Analysis (Dec. 31)****
The market powered ahead this week on expected light volume during this holiday week. Wall Street is ready to celebrate Dow 11,000 which could provide at least a short term top.
There are topping signs, at least for a temporary top. One is below:
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Some others are the rate of change and the DMI (ADX) on the Nasdaq:
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But the a/d line, new highs/new lows, major indices formations (many making new highs recently), and OBV are quite positive.
The McOsi/Summation, stochastics, RSI, and MACD are neutral to modestly positive in the short term.
It would not be surprising if the market has made a short term top already or will do so early this week.
But the money flows and bullish momentum could impact the market sometime in January after a short correction, and then later in the first quarter could see a more significant decline.
There has been talk about the bullishness of this year ending in a "5." That is purely coincidental as there is no logical reason why that is a seasonal trend. The two years after an election tend to be weaker than the two years leading to an election though.
Sentiment is extremely bullish on Wall Street and only slightly less so on main street. Investor's Intelligence and other surveys are very bullish which is a warning sign for the longer term.
Crude oil was basically flat this week and now seems poised to test at least the 40 1/2 level and quite possibly the 38 support level in January. The technicals for crude are in their mid-range, not oversold and not overbought. I like the risk-reward ratio better when they are oversold. Most on Wall Street now believe spot crude will spend 2005 in the low to mid 30's per barrel. But a washout in the next month could provide a bottom and base from which crude will have a higher range than that, perhaps the mid-30's to the mid-50's again.
Bonds and gold were quiet while the USD continues to be weak, not able to muster much of a technical bounce so far. Gold shares still show bearish divergence from the spot price.
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. There are many other TA structures, strategies and systems.
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