***** Technical Analysis (for January 7)*****
The overall volume picked up today on the Nasdaq in particular as that index rose on good market internals while the Dow and S&P 500 fell mildly.
The Nasdaq TRIN closed at a very positive .46, as the a/d was 8/9, but the up/down volume was much better at 11/6, indicating moderate accumulation of the stocks that were up, and on higher volume of 1.76B shares. Now the bulls need to see even higher volume and a stronger rally in the next day or two in order to validate this rally as one that has legs.
The Nasdaq MACD, Williams%R, DMI, CCI and Acc//Dist remain positive while the Money Flow stays neutral and the Aroon remains negative. The ROC has not yet shown negative divergence. The RSI rose to 59.3, and the index is above the 50 dma (1390) and temporarily reached the 200 dma (1439) when it had an intra-day high of 1442. The Nasdaq needs to not only close above the 200 dma but to also stay above it. A few times in the past 2 3/4 years it has risen above it only to fall badly soon afterwards to make new lows.
Dow Theory states that rising above a declining 200 dma is a negative occurrence and is usually a failure. It is better to rise above a rising 200 dma.
The Nasdaq McClellan Oscillator declined to +13 from +18 but its 10% index remains above both the 5% one and the zero line. Stochastics are still modestly positive and nearing overbought enough for a crossover.
The NYSE TRIN closed at a neutral .89, with a/d of 13/20, up/down volume 3/4, on 1.55B shares. The fact that the TRIN was not above 1.00 when the index had decidedly negative breadth leads me to believe there is a little more life in this rally as strong distribution did not occur today. The McClellan Oscillator declined to +26 but its 10% index remains in positive territory.
The VIX and VXN MACDs are showing slightly negative divergences and the VIX and VXN themselves may be forming a double bottom reversal pattern. These developments would be quite bearish for the next 2 weeks to 2 months. The put/call ratio is at .66 and its MACD is giving a negative reading. Advisors are almost twice as bullish as bearish, a negative sign.
The Nasdaq has closed well above its 1420 resitance level and the next level is near 1480, and then 1521. If the rally fails soon as I believe probable, then it won't get to 1521.
The Dow has not closed significantly above 8770 resistance though it did trade to just above 8800 today, but closed below its opening price. The 9043 and 9077 levels pose strong resistance, and the senior index may not get there either before a reversal.
It does appear very possible that the market has another bounce in it as the market internals have not been terribly bad during these mixed or weak days. A failure to take out recent highs and on heavy volume will portend the next major move being down, possibly for the next 2-3 months.
Watch the movement of the up/down volume figures closely intra-day to provide the best clue as to the day's trend, especially during the mid-day countertrend dips and rises as resets.
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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