***** Technical Analysis (for October 25)*****
The technology-laden Nasdaq led the market advance on Friday, but on very light volume. The breadth momentum indicator has strengthened, implying that the rally has some more to go.
The Nasdaq TRIN closed at a very positive .49, with a/d of 20/11, on very light volume of 1.5B shares. The MACD, Williams%R, and Acc/Dist remain very positive while the CCI, DMI (ADX), and Money Flow remain moderately positive. The RSI rose to 61.0.
The Nasdaq McClellan Oscillator rose to +58, with its 10% index well above the 5% one, signalling more firmness ahead in the days to come. The monthly stochastic is 13% crossed up, weekly is 43% going up, daily 99% and hourly 100%, so it may indicate the index needs a correction now.
The NYSE TRIN closed at a mildly positive .82, with a/d of 11/5, up/down volume 5/2, on only 1.3B shares. The McCellan Oscillator rose to +34 and its 10% index rose above the zero line finally. The weekly stochastic is 44% going up, daily 91% going up and hourly 61% going up.
The VIX/VXN dropped to 36 and 56, respectively and their MACDs are getting fairly low. The put/call ratio dropped to .77.
The Nasdaq broke above the 1320 resistance level and now will probably test and perhaps break above the 1350 resistance and may work its way to the 1425 resistance level. The Dow can test resistance at 8600 this week and will find strong resistance at 9000.
While the daily charts might be forming an inverted head and shoulders formation for the Nasdaq, it is too early to tell, and this formation is only confirmed by a breakout out of the right shoulder. The weekly and monthly charts say something very different, i.e. the index is still caught in a series of lower highs and lower lows.
This rally is attributed to favorable seasonality in part while the main factor is simply the washout of sellers on or about October 9 and bargain hunting. But there is not yet strong insitutional buying as evidenced by the overall volume numbers. This could change in the weeks to come but until it does, this rally should be viewed with caution.
Many analysts have been stating that this rally will last to April, or at least to the end of the year. The technical data does not yet support that contention, nor do the fundamental ones.
For now, fast swing traders can make profits going long or short as the market has an upward bias though in a choppy fashion. But I remain skeptical of this rally for position traders looking out a few months.
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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