***** Technical Analysis (for November 18)*****
Has the Nasdaq formed a triple top reversal? If so, it has dire implications for the overall market, because it has outperformed the Dow and S&P 500 in recent weeks. The Dow has not acted very well as it has lagged the other two indices. The Nasdaq could muster up enough steam to rally once again but thus far it has formed a "double cross" on the daily stochastics as has the SPX, which could be a bearish harbinger of things to come.
The Nasdaq reached 1425 before closing well below its high and opening of 1422, at 1393. The TRIN was a mildly positive .83, with a/d of 7/10, while up/down volume was a bit better at 16/19, on moderately light volume of 1.8B shares. The MACD is now neutral and the Williams%R and CCI also worsened to neutral and the Money Flow has worsened to a mildly positive reading. The DMI (ADX), Acc/Dist and Aroon remain positive, and the RSI dropped to 59.3.
The Nasdaq McClellan Oscillator dropped to +11 while its 10% index is still positive but also has weakened. The daily stochastic is 79% crossed down while the hourly is 33% going down and the weekly and monthly are crossed up.
The NYSE TRIN closed at a mildly negative 1.12, with a/d of 7/9, up/down volume of 5/7, on light volume of 1.25B shares. The daily stochastic is 48% going down for the Dow. The McClellan Oscillator dropped to +22.
The VIX/VXN were little changed at 31 and 48. The put/call ratio rose to .65 and its MACD is still giving a negative reading.
The question is whether the recent loss of momentum and slight decline is a correction of this rally leading to another rise or if it is a precursor to another downdraft. The Nasdaq has gaps at 1371, 1221 and 1166, which should ultimately fill. The 1371 gap could fill and then see another rally. If the Nasdaq does not take out 1426 in the next week or so, the index could be in for a rough time in the weeks ahead.
The Dow and S&P 500 have not been able to keep up with the Nasdaq in the last 6 weeks, which some consider one form of bearish divergence because it does not represent a broad-based rally.
Other possible bearish divergences are the McClellan Oscillator (which may be setting lower highs), CCI, ROC, and Money Flow. The market has not had very good follow-through to the upside in the past week nor has the overall volume been heavy during rallies.
While the bulls have not given up, it may not be long before we see signs of distribution to match the bearish divergences, if one is to view the action recently as bullish momentum dissipating. Thus, the next major move of 1,000 Dow points or 200 Nasdaq points may be south.
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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