***** Technical Analysis (for January 8)*****
The Nasdaq couldn't stand reaching the 200 day moving average yesterday and fell more today, ending up midway between the 200 dma at 1437 and the 50 dma at 1392, on a close of 1401. The other indices are below their 200 day moving averages as well.
For Wednesday, the Nasdaq TRIN closed at a very negative 3.10, with a/d of 11/20, up/down volume 1/5, indicating moderately severe distribution, on light volume of 1.5B shares. The NYSE TRIN was 1.62, with a/d of 3/5, up/down volume 1/3, on light volume of 1.4B shares.
The market is losing its momentum as the 2 month rally ended at a high that is significantly higher than where we are now, even after the Dow rallied 432 points in 3 days after the first of the year. The Dow needs to take out at least 8770 in the next few days and preferably 9043, otherwise it will likely start declining from a series of lower highs.
The Dow Theory doesn't like rising prices to a declining 200 day moving average and Elliot Wave count indicates another large wave down is imminent. Kondratieff cycle theory indicates that there will be a few more years of weakness in stocks and other financial vehicles as "debt is cleansed out of the system."
The Nasdaq McClellan Oscillator declined to -1 and its 10% index is now once again below the zero line as well as the 5% index, as these indicators whipsaw above and below the neutral zero line. But they are making lower highs, a bad sign. The NYSE McClellan Oscillator closed at +8 as it also weakened severely and its 10% index fell just below its 5% one.
The VIX and VXN are showing bearish divergences and they could be making a double bottom reversal pattern but their MACDs are crossed down still. The put/call ratio MACD is bearish, and advisors are still to bullish at 48%/25% bullish/bearish.
The Nasdaq RSI declined to 52.8 and its MACD, DMI and CCI remain positive, so there could be another bounce in this index in the next day or two, but only heavy volume rallies would likely get the bullish momentum back for these indicators. The Williams%R weakened to neutral and the Money Flow remains neutral. The Acc/Dist worsened to negative and the Aroon remained negative. Daily stochastics remain crossed up while the hourlies indicate more weakness for a few hours is probable before a bounce.
The top for this intermediate cycle may already be in as the Dow and Nasdaq met resistance a couple of days ago and have failed to stay above those levels. If not, then the indices can enjoy a choppy rally in the next few days, getting back to recent highs but a breakout above the December 2 highs is necessary to confirm the rally of October and November as having been the start of a larger move up rather than a technical rally that is doomed to fail and for the indices to at least retest the October 9 lows in the months ahead.
Gold staged a strong comeback today despite many gold stocks not reaching an oversold condition. In bull markets, the indicators only get mildly oversold before rallying again for several times before finally they suffer a more conventional and severe correction. Gold will fall more sharply if it cannot take out $357 on heavier volume, and the HUI has resistance at 155.
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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