***** Technical Analysis (for November 22)*****
The markets paused to refresh on Friday after Thursday's frantic rally on heavy volume. In intial legs up in bull markets, there are 4 consecutive days of heavy volume rallies frequently, so Friday's lack of follow-through (along with other indications) implies this remains a technical rally within a bear market.
The bullish momentum remains however, and strength should resume on Monday, or Tuesday at the latest. The question is whether the volume will be heavy enough to signal major accumulation by the institutions. The Nasdaq has another gap below at 1419, and the last one was filled at 1371 which was followed by another runup.
The McClellan Oscillators were little changed for both the Nasdaq and NYSE, implying a major move within four sessions. The Nasdaq oscillator reading has come down to zero and +2 in the past few weeks, only to rise again as dip-buyers came back in and sellers didn't have conviction.
The Nasdaq RSI rose to 66.5 and is once again running up to the overbought 70 level where tops sometimes occur. The MACd, DMI, CCI, Money Flow, Acc/Dist and Aroon remain positive while the Rate of Change remains negative, giving some caution as it is a leading indicator and is vindicated almost all of the time as long as it does not change to a positive reading.
The sentiment indicators are signalling caution as well for the intermediate term, which I define as 2-6 months because they often are not a great short term timing tool. The VIX and VXN can give a fairly good timing signal when they spike up to extreme levels, but low levels are not great for timing. They are trending downward with the uptrending market. The put/call ratio is giving a neutral to negative reading. Advisors are much more bullish than bearish, a negative signal.
The daily charts and daily and weekly stochastics look positive for the Dow, Nasdaq and S&P 500, implying a retest of the 9077, 1568, and 975 levels, respectively, in the days to come. The prior resistance levels of 8770, 1426 and 895 were taken out and now are support levels.
But the bear market is alive and well in all likelihood and could rear its ugly head once again in December or January. In the meantime, the market could be choppy with a slightly upward bias, at least for this week. When the weakness returns, we should ultimately see the Nasdaq gaps get filled below at 1221 and 1166, and perhaps even retests of 1108, 7197 and 768 for the Nasdaq, Dow and S&P 500 next year.
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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