***** Technical Analysis (for October 24)*****
Perhaps sharing some of my TA tips or strategies, many of which I am not very explicit in teaching due to the fact that they are automatic and taken for granted by me, may be helpful to some here.
When one sees the McClellan Oscillator, 10% index, or Williams%R make two or three similar highs while the other major indicators such as the CCI, DMI (ADX), or Money Flow make lower highs, that is a red flag or bearish divergence. On future attempts to rally, the others need to reach stronger readings, otherwise it confirms a bearish signal.
Just recently the CCI has weakened a bit, the +DMI has not been stronger, nor has the Money Flow become more positive. As mentioned yesterday, the NYSE McClellan Oscillator has been weaker than the Nasdaq one. The slow and fast stochastics which can be found at Stockcharts.com, are signalling an overbought market which portends imminent weakness unless the bounces and rallies occur on heavier volume.
Additionally, the a/d line and new highs/new lows are not indicating a trend reversal but rather a resetting. The put/call ratio's MACD reading is more consistent with a top than a bottom, and it is a leading indicator so the top may not occur for a short time yet. The VIX's MACD is quite bearish while the VXN's MACD implies that the Nasdaq may be relatively stronger a little longer.
The Nasdaq failed to hold above 1320 resistance despite trading to 1330 today, and if it does not take out 1330 in the next 1-2 days, it could be a harbinger of things to come. The S&P 500 has struggled to get above the 900 resistance level.
Bulls can say that the market is just taking a breather after making a large move up from October 9. If they are right, then we need to make a heavy volume rally rather soon, or risk a series of lower highs and lower lows on both the technical indicators and index prices.
The strongest indicator readings now are the MACD and weekly and daily stochastics for the Nasdaq. The daily stochastic reading implies that the end of this rally is likely within a day or two unless we get very strong market internals pronto. And the daily MACD needs a rally now to prevent it from losing a lot of momentum. The indices did get a little parabolic on the upside on Monday.
If we get positive market internals tomorrow morning and a strong close, then we can extend this rally for next week, but a weak close on Friday would increase the odds for next week to be down. It seems that the market has got a little more juice in it and that it will not drop precipitously right away. There is some resistance at 8600 and formidable resistance at 9000, while the Nasdaq could yet rise to 1350 resistance or towards the 1425 level of resistance if the institutions can muster up another rally.
By the way, if you look at the monthly and weekly charts of the major indices and indicators, you would expect that the downtrend is intact and that lower lows may yet be in our future, taking out 7197, 768 and 1108. Remember that the Dow and Nasdaq made significantly lower lows on October 9 as opposed to a successful retest of the July 24 bottom.
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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