***** Technical Analysis (for October 17)*****
A powerful rally on Thursday highlights the schizophrenic nature of this market lately. The Dow broke above the 8250 resistance level while the Nasdaq had a good move up as well and is near the prior resistance level of 1270.
Opposing forces and factors are many.
The bullish ones are:
1) Nasdaq MACD, McClellan Oscillator, DMI (ADX), CCI and Williams%R having very positive readings,
2) Stochastics crossed up for the weeklies and dailies,
3) VIX/VXN's MACDs are crossed back down,
4) Favorable seasonality currently,
5) Huge liquidity available from money markets and CDs,
6) Fair to good earnings reports.
The bearish ones are:
1) Gaps below on the major indices,
2) Possible exhaustion gap forming,
3) Rally has been on moderate volume,
4) Worries aplenty: Iraqi war possibility, terrorist attacks expected, Japan's banking crisis, accounting scandals, pension funds underfunded, chance for double-dip recession, USD worries, Argentina/Brazil economic problems,
5) Dow and Nasdaq made new recent lows, implying the series of lower lows has not ended yet,
6) No selling climax or capitulation,
7) High valuations, such as S&P 500 P/E over 25, compared to historical average of 16 and average at the prior bottoms of 11.
Today's action improved the technicals wherein only the Money Flow and Aroon remained negative and the Acc/Dist is neutral on the Nasdaq.
If the market gaps up on Friday or trades sharply higher, then the market risks exhausting the rally within a day or two at the most. The question is whether it will be a temporary drop or the beginning of a trend reversal back down.
Dr.Bob's commentaries are not to be construed as recommendations to buy or sell stocks, options, or index vehicles. 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 or forecast.
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