***** Technical Analysis (for October 4)*****
The Dow's decline on Friday once again threatens a 5 year low while the Nasdaq did make a new low as it grinds down. The NYSE Composite index also has a descending triangle at 425 and the S&P 500 closed at 800, just 25 points above its July 24 intra-day low. Interestingly, the major indices are not nearly as parabolic as they can get.
The NYSE, Nasdaq and AMEX new highs vs. new lows are all trending downward while the a/d lines are backing down again. The market has been in terrible technical condition since the 5 week rally from the July 24 lows and yet it has not resulted in a selling climax or capitulation.
The Nasdaq McClellan Oscillator now stands at -32 (and can reach -50 to -70 sometimes) and its 10% index is nearing extreme levels, though it can sometimes spend some time there or have a double bottom at those levels. The RSI dropped to 34.3 and is at an extreme level. The MACD, CCI, Money Flow and Acc/Dist worsened badly. The monthly and weekly stochastics are now at 0%.
The NYSE McClellan Oscillator is at -39 (and can get to -60 to -80) but it and its 10% index can get significantly more extreme. The Dow monthly and weekly stochastics dropped to 2% so at least it is getting closer to signalling a bottom.
The VIX/VXN rose modestly to 46.3/60.3 but far from being extreme. The put/call ratio has been rising at closed at .96, but its MACD is neutral, not bullish. The Investors Intelligence bullish and bearish advisors are now even at 38%, an improvement from the last several weeks wherein the bullish advisors had outnumbered the bearish ones by an average of 10%.
The Dow is likely to trade down substantially below 7500 before at least a tradeable bottom can be reached, and it has support at 6550 next on a long term basis, though it could bottom above that level. The S&P 500 could trade down to 650-700 and the Nasdaq is nearing the first target support level of 1100, with the next major long term support level being at 1000 on the monthly charts.
Sellers could get washed out by a big spike down in the major indices on heavy volume. Otherwise, we will grind down more in choppy but down trending fashion. Perhaps some news will provide a crisis from which the climax or capitulation can occur.
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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