***** Technical Analysis (for October 7)*****
The markets were down in very light trading as the Dow made a 5 year low and the Nasdaq made another 6 year low while the S&P 500 is within 10 points of its July 24 intra-day low of 775. We are now so oversold that unless the market trades sharply lower near the opening, we are likely to see another technical bounce, but it could last a few hours, or just a day or two.
The President's speech may not move the markets much at all on Tuesday and thus we may see a bounce. While there is always a small chance that the market made a bottom, it has to be considered very unlikely because the technical damage is severe but without a selling climax or capitulation.
For today, Monday, the Nasdaq TRIN was a neutral .97, with a/d of 3/8, up/down volume of 1/3, on only 1.4B shares. The MACD, rate of change, Williams%R, DMI (ADX), CCI, Money Flow, Acc/Dist and Aroon remain negative. The ROC turned negative on Friday. The RSI dropped to 32.2.
The Nasdaq McClellan Oscillator dropped to -46, with its 10% index getting extreme and the Summation Index is at -933 as it approaches -1000 as expected. The monthly stochastic is 0% as is the weekly but the hourly is 6% going up, indicating a possible bounce.
The NYSE TRIN closed at 1.42, with a/d of 7/25, up/down volume 1/5, indicating distribution. Volume was only 1.5B shares. The Dow monthly and weekly stochastics are now at 0% while the "d" is still fairly high, so there is a possibility that the index can go lower for a few days. The McClellan Oscillator dropped to -58, with its 10% index not nearly as extreme as the Nasdaq one. The NYSE Composite is threatening to make its own descending triangle.
The VIX/VXN rose to 49.2/62.3, but they still have room to go higher and sometimes there is a double top, which would imply that we could have 7-15 more days of weak action. The put/call ratio rose to 1.04, as it is showing some signs that we are nearing a bottom. The advisors are even at 38% bullish and bearish. Anecdotally, the sentiment at my Sunday night AOL Stocktimers meeting, was extremely bearish, so from a contrarian view, it may indicate we are nearing a bottom of some kind.
The Dow and other major indices could make a technical bounce but it may be moribund, leading to another downdraft, and perhaps climactic selling or a capitulation in October. There is not much support on the Dow until around 6550 and the Nasdaq has little until 1000, with a little at 1100. Amazingly, the major indices are not extremely parabolic yet.
The S&P 500 has held up the best since July as blue chips have been fighting the down trend, but they may be ready to join the down trend, in earnest after a technical bounce. A technical rally appears unlikely now.
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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