***** Technical Analysis (October 20)****
The only solace for those who are long today is that some breadth indicators have not turned negative yet, such as the a/d line and new highs/new lows, nor have the trendlines been violated.
However, the next support level for the Nasdaq is the 1842 gap and the 50 dma at 1846. With the index closing at the lows of the session, the negative momentum should carry over into Thursday morning, and if the internals are very negative, then sellers could cause another substantially weak day.
If so, the McClellan Oscillators could get more extreme in the next few days than their current readings of -27/-28 for the Nasdaq/NYSE Oscillators. Extreme readings for the Nasdaq Osc are -50 to -70 and the NYSE Osc can get to -60 to -75. If we get there, then it might coincide with support for the indices.
Today the Nasdaq TRIN closed at a neutral 1.08, with a/d of 1/3, up/down volume 4/13, which indicates moderate distribution, on light volume of 1.7B shares. The MACD worsened to negative while the Williams%R worsened to neutral, and the RSI dropped to 52.
The Money Flow improved a hair but hasn't been very strong during the recent rally to Nasdaq 1966. The DMI (ADX), Acc/Dist and Aroon remain positive but we shall see how they hold up during the next few days if we have weakness.
With the Summation Indexes at relatively high levels, it wouldn't seem likely we would have a sharp and extended decline from here, but there can be exceptions to the rule.
The market disappointed in not extending the rally to Dow 10,000/Nasdaq 2,000-2,098 and the technical indicators didn't get as positive as it had in prior rallies during the Summer.
Thus, the question is whether the top is in or if we are resetting once again for another run towards retesting or taking out the recent highs. The bulls need to see this decline contained by early next week it would seem, and then for the internals and closing strength to improve.
The sharp decline today can qualify for the major move, which has been signalled by the NYSE McC Osc several times during the past week and a half.
I would expect the Nasdaq TRIN to be worse on Thursday than today's 1.08, which would mean that either the up/down volume will be worse than 4/13 or the a/d will be better than 1/3. The neutral 1.08 reading belies the negative breadth but shows that distribution could have been worse and if we are to get more oversold, then the index and u/d volume could be quite weak tomorrow morning.
The McClellan 10% indexes for the Nasdaq and NYSE crossed below the 5% indexes and the Nasdaq one is below the zero line now while the NYSE one is still above zero, so the Nasdaq stocks are not acting as well as the NYSE ones.
The indices remain well above their 200 dmas but are nearing their 50 dmas. The expectation is that they will test the 50 dmas in the next few days.
Gold stocks rose again as did bonds, so moneys transferred out of stocks and into those two vehicles for the day. Until proven otherwise, the major trends remain intact.
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. |
