***** Technical Analysis (January 14)****
The stock market was modestly weak this past week after a sharp selloff in the first week of the year, not surprising because there were signs of an intermediate top in late December as discussed here.
Now the oversold condition can be worked off by a modest technical rally this week and possibly into next, but the trend reversal that started in the new year could be longer-lasting than Wall Street is prepared for.
The Nasdaq Summation Index has now fallen to just below the zero line and if it makes a lower high during the next rally, it could portend a major decline in the next 2-3 months. The NYSE Summation is now just above +500 and it too could make a lower high during the next rally.
Stochastics and MACDs are all looking weak along with moving averages. A "double cross" and more bearish divergences showing up during the next failed rally could confirm that the top is in and that we will see a series of lower highs and lower lows for the next 2 quarters.
The a/d line and new highs/new lows are holding up and they should provide for another technical rally that may have already started, but should they fail to make a higher high during the next major rally, it could cement the fate for stocks this year.
The only sector that looks positive right now is the energy sector and some of the basic materials stocks. Crude has held above $40/barrel despite several attempts to break and now has risen to 48, closing above the important 44 support level. Some backing and filling may now occur and then another leg up to test 50 may ensue late in January or in the first half of February.
Gold has flattened out and is trying to find a base while bonds rallied moderately last week and is resisting a sharp decline. The USD is trying to continue its rally off of its recent lows near 80.
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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