***** Technical Analysis (for November 20)*****
After a flat opening, the market internals quickly became positive this morning, with up/down volume indicating moderate accumulation. The Nasdaq once again led the way percentage-wise while the Dow had a nice run of its own and the S&P 500 lagged a bit.
The Nasdaq is within spitting distance of taking out 1426 while the Dow is not too close to 9077 nor the S&P 500 to 775. But the Dow could reach or surpass the next resistance level of 8770 where it has been stumped two times before.
The Nasdaq TRIN closed at a very positive .36, with a/d of 11/5, up/down volume of 15/2, on moderately light volume of 1.8B shares. The MACD improved to neutral while the rate of change is negative and the OBV is neutral to negative. The Williams%R and Acc/Dist improved to positive while the DMI (ADX), Money Flow and Aroon remained positive although the Money Flow is not strongly positive.
The RSI rose to 61.5, which is one of the signs of bearish divergence, along with the MACD, CCI, and McClellan Oscillator. The Oscillator rose to +20 from +2 and the 10% index became more positive, though not as positive as before when the index reached 1426. The daily stochastic is 95% though the "d" is low enough to have room for more upside action. The 200 dma is at 1505 and declining, so the index has a chance to reach it, which it hasn't had for a long time.
The NYSE TRIN closed at a mildly positive .73, with a/d of 11/5, up/down volume 3/1, on moderately light volume of 1.5B shares. The McClellan Oscillator rose to +30 and its Summation Index rose to +96. The daily stochastic is 70% crossed up so there is more room.
The VIX/VXN declined to 28.6/44.8 and their MACDs are crossed back down, so more upside action is possible from this indication. The put/call ratio dropped to .63 and its MACD is very low, a sign that we may be nearer a top than a bottom in the market.
The overall volume has still not increased on rally days, including today. Favorable seasonality and an oversold condition on October 9 has contributed to this 6 week rally. A break out from the trading range of 8770 to 8350 is still being anticipated this week. Bearish divergences along with a lack of heavy volume rallies indicates that the next big move will be down in all likelihood even if we continue this choppy rally for a few more days, unless these divergences disappear and the volume increases.
I also should mention that there are certain principles or paradigms that are rarely if ever not borne out from a fundamental standpoint. The valuations of stocks are at least twice that of what they historically average from a price/earnings and market capitalization/GDP standpoint. On these two measures, there is always a regression to the mean eventually.
Markets overshoot on the upside as in 1999 and early 2000 and in 1929, and they can overshoot on the downside as in 1932. I don't believe we have put in a bottom yet and that we will overshoot on the downside in the future.
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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