***** Technical Analysis (for January 2)*****
The market exploded on the heels of the surprisingly positive ISM manufacturing report for the last month, with the Dow rising 265 points and the Nasdaq 49 points, but on very light trading for such a rally day. I don't know if I've ever seen the market rise so much on so little volume, and if the up trend is to continue, the volume should rise to at least 1.8B or 2.0B shares, and preferably above 2.4B shares per day.
The Nasdaq TRIN closed at an extremely positive .22, with a/d of 23/10, up/down volume 10/1, indicating strong accumulation, but on 1.3B shares. The MACD, Money Flow, Acc/Dist and Aroon remain negative but they improved and are not far from neutral readings. The Williams%R, DMI and CCI are now neutral while the ADX remains negative. The RSI rose sharply to 51.3.
The Nasdaq McClellan Oscillator rose to positive territory at +3, with the 10% index rising above the 5% index and almost reached the zero line today. The weekly stochastic rose to 66% crossed up now, daily is 39% crossed up, and hourly is 100%, with a "d" low enough for a few more hours of rallying or a few days.
The NYSE TRIN closed at an extremely positive .23, with a/d of 25/7, up/down volume 14/1, indicating very strong accumulation, but on only 1.2B shares. The McClellan Oscillator rose to +29 and the 10% index is above the 5% one and the zero line. The NYSE a/d line rose above the recent tops, giving a short term positive signal. The hourly stochastic is also 100%.
Interestingly the VIX MACD did not improve but is now uncrossed while the VXN MACD worsened to be uncrossed despite the strong rally on the Nasdaq. These are considered bearish divergences. The put/call ratio is .76 and its MACD is bearish. The advisors are not as bullish as they have been the last few weeks.
The Dow is nearing the 8650 and 8770 resistance levels as is the Nasdaq nearing 1420 after taking out 1380. If the volume were heavier, there would be more confidence technically that this will end up being a rally for 2 weeks to up to 2 months, but light volume rallies almost always end up being very moribund in bear markets. Thus, it could last until early next week if we don't get a good pullback on Friday or Monday, but if we do get a pullback, then it may last a little longer in order to retest resistance levels.
Bonds declined as money flowed into stocks and the U.S. dollar also declined in resetting its recent moves up. The March gold futures contract was little changed today after having traded as low as 343, where it has found support a few days ago. Gold is trying to form a high level consolidation instead of a sharper correction that would reset the daily stochastics back down to 25%, but this time it may not get there. It may retest $355 and perhaps take it out first before a large correction occurs.
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.
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