***** Technical Analysis (October 17)****
Triple-witching Friday resulted in being consistent with the Friday reversal rule, as the market was higher than last Friday's close as we entered into the opening today, so some weakness was likely.
The Nasdaq led the way down with the largest decline on a percentage basis. The TRIN was a negative 2.04, a/d was 9/21, up/down volume was 3/14, on moderate volume of 1.75B shares. Usually triple-witching has heavy volume. The MACD, OBV, DMI (ADX), Acc/Dist and Aroon are positive while the rate of change, Williams%R, CCI, and Money Flow are neutral, and the RSI dropped to 56.
The Nasdaq McClellan Oscillator turned negative today, down to -6 from +18 so the Summation Index is now going down at +482. From the Summation's moderately high level, it is not necessarily disastrous to turn down but needs to contain the decline to a short time if the up trend is to reassert itself and for this drop to represent a resetting of the indicators and not a trend reversal.
The Nasdaq monthly stochastic is 93% crossed up, weekly 88% crossed down, daily 70% crossed down, hourly 3% crossed down, so a bounce is due within a few hours or one day.
Despite the recent weakness, the major indices are still trading within their rising trend channels and the lower trendlines have not been breached. Previously these declines have shown up on breadth charts as backing and filling retracements and not trend reversals.
One question is whether those who have sold for profits will re-invest those moneys on the long side by buying on dips and pullbacks, such as the one we are having now, as they have done over the past 6 months, or if selling pressure will cause them to sell more positions.
The NYSE TRIN closed at a negative 1.67, with a/d of 5/11, up/down volume 3/10, on light volume of 1.3B shares, small solace for the bulls. The NYSE McClellan Oscillator also turned negative at -9, down from +15. The Summation Index is going down now from a high level of 959.
The Dow monthly stochastic is 72% crossed up, weekly 90% sideways, daily 19% sideways, hourly 14% going up, so this index is giving mixed signals.
The VIX/VXN MACDs are still crossed down and the raw readings remain quite low, both positive signs. The put/call ratio did not rise despite the weakness.
Some possible scenarios are:
1) Dow/Nasdaq support to hold near 9600/1880, respectively, and then another rally to at least retest the recent recovery highs. If those retests are accompanied by heavier volume and strong internals, those resistance levels will be taken out within a day or two.
2) Additional weakness over the next few weeks, with lower trendlines being broken, and a period of a lower trading range. Dow could have low end of range at 9200-9400 and high end of 9600-9750, over the next several weeks. Then another rally going into the end of the year, to or above the recent recovery highs.
3) Trend reversal, with lower highs and lower lows over the next 2-3 months.
While no one has a crystal ball, the daily and weekly charts favor #1 or #2 until the bears and the charts prove otherwise. The next couple of days could determine if #1 or #2 will be more likely.
Technically I would look to see what the market internals say, e.g if the up/down volume is stronger than the a/d. Also, the a/d line and new highs/new lows are still quite positive in their formations, so keep track of those as well to discern if they break down.
Additionally, the strength or weakness into the close of each session is important, as most of the institutional accumulation or distribution occurs then.
The major move signals have not been proven out so far but a few days remain for the signal, so we shall see.
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.
Dr.Bob no longer hosts Stocktimers meetings on Sunday nights at AOL. |
