***** Technical Analysis (for November 8)*****
The market did not follow-through on the downside in a significant way which opens the door for a bounce on Monday, but the stochastics have now crossed down from very high levels after a recent stochastic pop. This, along with a weakening of the breadth momentum indicator, the CCI, and an island gap reversal in the VXN a few days ago, does not bode well for the next few weeks.
The Dow has a short-term double top near 8770 and the same for the Nasdaq at 1420-1426, so if the next rally fails to take them out, these indices should take another turn to decline sharply. The Dow and S&P 500 need to take out their August highs of 9077 and 965 in order to make the first in a series of higher highs if one is too believe that October 9 was the low. The odds of that happening has lessened substantially from a technical standpoint.
The Nasdaq TRIN closed at a negative 1.72, with a/d of 7/9, up/down volume 4/11, on 1.6B shares. The McClellan Oscillator dropped to +27, with the 10% index falling but still positive. The Williams%R remained neutral while the CCI worsened to neutral, and the others remained positive though some weakened. The RSI dropped to 57.6. The daily stochastic is 74% crossed down. Also, the slow and fast stochastics are crossed down from very high levels.
The Nasdaq did fill its gap at 1360 as expected and then closed just one point below it, which makes it unclear whether the index will fall below it immediately or if it will bounce first. The index did indeed close well below its opening price of 1376, which is negative.
The NYSE TRIN closed at a negative 2.04, with a/d of 13/19, up/down volume 1/3, on 1.4B shares. The McClellan Oscillator dropped to +23. The Dow daily stochastic is 79% crossed down.
Most signs indicate the recent rally has met some distribution and that its days are numbered. The bulls are not giving up easily and there can still be some technical bounces as we grind back down, and there probably will eventually be an acceleration of the downdraft to fill the Nasdaq gaps below and to retest the October lows.
The excuse for any declines will be the tensions regarding Iraq, the realization that the elections will not guarantee improved corporate fundamentals or a bullish stock market, and continued worries about the US dollar, Japan's banking system and stock market problems, the Israeli-Palestinian conflict, Argentina-Brazil worries, and corporate governance problems (including the recent concerns about the SEC chairmanship and accounting).
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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