***** Technical Analysis (for October 22)*****
The sellers couldn't accelerate the decline on Tuesday as the indices suffered only modest losses, so they may make another run upwards. The question is whether the technical indicators will make lower highs while the indices make higher highs, thereby providing bearish divergences and an unwinding of the overbought indicators.
The Nasdaq TRIN was a mildly positive .85, which is constructive considering the index was down and the a/d was negative at 13/19, with up/down volume at 8/9 (a sign that severe distribution did not occur), on light volume of 1.7B shares.
The Nasdaq RSI dropped to 57.8, while the MACD, Williams%R, CCI, DMI (ADX), Money Flow, Acc/Dist and Aroon remained positive. Several of these may start to unwind unless the overall volume increases significantly on rally days.
The Nasdaq McClellan Oscillator dropped to +43, with the 105 index still above the zero line and 5% index. The 10 dma is at 1252, which needs to hold support there. The 50 dma is at 1267 and the 200 dma is at 1566, one definition of a bear market. The weekly stochastic is crossed up at 36% going up, daily is 90% going up with a "d" that is not far from providing a crossover to the downside, but it will take 3-8 days typically from this reading.
The NYSE TRIN closed at a neutral 1.04, with a McClellan Oscillator reading of only +10 as most of this rally has been concentrated in the technology/growth stocks on the Nasdaq. Thus far the rally from October 9 appears similar to the one from July 24.
The VIX/VXN rose slightly to 39.3/53.6, respectively, and their MACDs are closer to signalling a top than a bottom. The put/call ratio rose to .83. The advisors are 28% bullish vs. 43% bearish, a positive signal.
There is a lot of talk in the media that we are enjoying the favorable seasonality factor now and that October 9 seems to be the bottom of this bear market.
From purely a technical viewpoint, it is much too early to be sure that the market has reversed trend, and that it is more likely that we will have at least a retest of the lows in the weeks or months to come.
Short term the market can rally again, but without much heavier volume, it is tenuous and likely to lead to another downdraft to retest the lows, at a minimum.
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.
Dr.Bob's mission is to teach Technical Analysis and demonstrate a structured approach to Market Analysis, for position, swing, and daytrading.
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