***** Technical Analysis (October 7)****
The market attempted to be weak this morning but sellers were outdone by dip-buyers and buyers who have missed some of this rally as the last half of the session saw a modest rally. The Dow, S&P 500 and Nasdaq are barely below their recent highs and probably have reset enough to take them out this week, or at the latest, next week.
The Nasdaq has not filled that gap at 1842 and is just 6 points from its recovery high so we may get an upside breakout before we fill that gap. Right now it would appear that shorts are taking the most risk in the near term.
The TRIN was .60/.81 for the Nasdaq and NYSE, indicating a mild accumulation day and on moderately light volume of 1.8B/1.3B shares.
The Nasdaq McClellan Oscillator rose to +19 from +13 as the index tries to regain relative strength and the NYSE Oscillator rose by only 1 to +33, thereby signalling a possible major move within 4 sessions, and the odds of that occurring and occurring to the upside is higher than usual.
The MACD, CCI, and OBV improved to positive, to join the Williams%R, DMI (ADX), Money Flow and Acc/Dist; thus, this could be just the start of a rally.
Valuations remain very high at a S&P 500 P/E of 28 for past 12 months, but the technicals and momentum can move the market in spite of the fundamental valuations. Right now the economic recovery and improving earnings are the excuse for liquidity to come back into traditional stocks, especially small caps/growth/Asian stocks, which have relative strength now and have all year long.
Particularly important technically is the MACD turning positive today and if it follows-through tomorrow and Thursday, which is likely, then this week may end up being the strong week I expected next week.
The missing piece of the puzzle is the volume and it may be need to be heavy in order to sustain a multi-month rally from here. But even if we get a dip or pullback now, I do not think we have made a double top reversal formation.
The sentiment indicators confirm the bullish scenario. The VIX/VXN MACDs have crossed back down, which is bullish.
Gold has steadied and today's modest rally has stopped the sharp decline for the time being, but a retest of the recent low of $367/oz may still occur. The USD fell today to help gold while bonds dropped after yesterday's bounce following Friday's ominious mini-crash. Bonds have apparently topped out in June and the 10 yr note may not see 3.1% or even 4% again but rather bonds will experience another leg down over the next few months.
Moneys may flow out of bonds, CDs, money markets and interest-sensitive investments and into stocks.
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.
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