***** Technical Analysis (for January 17)*****
The market failed to bounce on Friday as the Nasdaq gapped down from the opening and the other indices were down steadily after their openings. Now the hourly stochastic is at 0% for the Nasdaq and 8% for the Dow, so the odds for a bounce early Tuesday are increased, but the intermediate term trend remains down in all likelihood.
It is virtually impossible to predict the next day's trend but once the market opens, it provides market internals data that can be used to day or swing trade positions, existing or new ones. Sometimes the short term trend is so strong that one can forecast the trend continuing the next day, but that setup is in the minority.
What swing and position traders need to do is to interpret the 2 day to 2 week/2 month TA data to assess the likely trend and support/resistance levels, while always remaining flexible to changing their read of the signals.
It appears that a mixture of Scenario #2 and #3 that I discussed in a couple of TA Updates last week is getting the edge in probability and it started out as the most probable anyway. The Dow did get to the 8900-9000 area, but hasn't acted like it will get to 9077 or even 9043, and that level is getting less likely now as several technical indicators are continuing their weakened ways.
The Nasdaq McClellan Oscillator dropped to -10 from +6, turning negative for the third time in the past month. And the Summation Index is at lower levels and some other indicators are also showing that this weakness may be more than just a resetting or correction of a new up trend, but rather, it has been a technical rally that is over.
The NYSE Oscillator reading is at -13, and it never got back up above +40 this month as it had in November, another bearish divergence.
The Nasdaq TRIN closed at a negative 2.41, following readings in the prior two sessions at 1.95 and 2.73, indicating 3 days of distribution. The MACD worsened to neutral on Friday and if it does not turn up on Tuesday, a crossover to the downside could very well signal the beginning of a downtrend.
The Nasdaq DMI worsened from positive to negative in one day on Friday while the Money Flow worsened from neutral to negative. The Acc/Dist remained negative and the Williams%R, CCI, and Aroon remained neutral. The RSI dropped below the 50 neutral level to 44.8. The index also has fallen below its 200 and 50 day moving averages.
The Nasdaq weekly stochastic is 64% at risk of crossing down, daily is 35% crossed and going down, and the hourly is 0%, thus, a near term bounce is possible to be followed by more weakness.
The NYSE TRIN closed at a negative 1.66, on the heels of 1.71 and 1.44 the prior two days. The weekly stochastic is 75% crossed up, daily 54% crossed down and hourly 8%.
The VIX and VXN MACDs are neutral and uncrossed and they show bearish divergences. The put/call ratio rose dropped to .82, and its MACD is negative. Investors Intelligence shows bullish advisors at 50% and bearish ones at 47%, a moderately bearish signal.
The Nasdaq has a gap at 1420 and the bottom of that gap is at 1401, which could see the index rally up to, but the gap fill is not a sure thing. If it were to fill this week, then it would need to close above it that day, or the next day at the latest. Otherwise, a decline would likely ensue.
It appears that the indices have made their highs in the short-intermediate term of 2 weeks to 2 months, and that lower highs and lower lows may be made now. Until we get significantly lower and very oversold, any bounces or rallies may well be quite ephemeral.
The Dow has resistance at 8650 and 8770, where it may rally to before declining sharply. The Nasdaq has resistance at 1400 and 1420 from a couple of indications. If we get an impulse wave down, it might reach Dow 8250 and Nasdaq 1280-1300 first before much of a bounce, and those levels will ultimately break, to 7900 and 1221 gap fill, perhaps.
Gold stocks have corrected as have their stochastics and may have a bit more, but they have reset more than at any other time in the past 2 months. The resistance level is now at 359 and could be taken out this week, and then the next resistance level may be around 375, for London and Comex gold. The U.S. dollar in in another leg down at 101 currently and apparently on its way down to 98 in the weeks ahead.
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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