***** Technical Analysis (for October 18)*****
On Friday the major indices traded in a relatively narrow range, with the Dow and Nasdaq up modestly. The Dow is now threatening the 8400 resistance level and the S&P 500 is 16 points away from 900 now.
The Nasdaq's breadth momentum is stronger than the NYSE as the McClellan Oscillators are +50 and +18, and they are likely to make some lower highs unless the volume increases for rally days. Perhaps the blue chips will take their turn for relative strength in the next week or two.
But despite favorable seasonality now, the market still has a lot to prove technically to signal a long-term trend reversal after a 2 1/2 year bear market. Higher prices in a choppy rally this week would not be surprising, and positive earnings reports could provide the impetus, but the days appear numbered before another downdraft.
The Nasdaq TRIN closed at a positive .65, with a/d of 17/15, up/down volume 5/3, on 1.7B shares, as there was mild accumulation. The RSI rose to 58.2, with the MACD, Williams%R, DMI (ADX), CCI and Acc/Dist giving positive readings, though the DMI (ADX) is only mildly positive and did not get stronger.
The Williams%R, fast stochastics, and the McClellan Oscillator seem to be forming a double top, and the Nasdaq could start to "unwind" this week, which would be a bearish harbinger of things to come.
The Nasdaq still has gaps down below and they are very likely to be filled in the next few weeks.
The NYSE TRIN closed at a mildly positive .81, with a/d of 15/16, up/down volume 7/6, on only 1.4B shares.
The VIX/VXN dropped slightly to 39.8/55.3, respectively. The put/call ratio was little changed at .68.
It should be remembered that the Dow made new lows recently at 7197 as did the Nasdaq at 1108 while the S&P 500 barely did so at 768. This portends at least a retest and probably a break, in the weeks or few months to come.
The current rally may indeed turn out to be a technical one unless we see signs of major accumulation by institutions.
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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