***** Technical Analysis (for December 9)*****
The weekly Dow is showing a bearish engulging candlestick which means we have traded higher and closed lower than the prior week, and along with the daily stochastic crossover and McClellan Oscillator falling below 0, we are probably in for weeks of weakness.
The Nasdaq has dropped 30% this year while the Dow has fallen 15%, consistent with the Nasdaq being twice as volatile as the Dow, and the S&P 500 has declined right in between those two at 22%. The Nasdaq had rallied to just above the 200 day moving average while the Dow and S&P 500 never quite got to theirs, but all have failed to make a new higher high and higher low.
We shall see if the market can muster up a significant rally now that it is oversold on a short term basis with today's sharp decline on light volume. Dow has resistance at 8600 and 8770 while the Nasdaq has it at 1420.
The Nasdaq TRIN was a very negative 4.84, with a/d of 9/23, up/down volume 1/13, on 1.5B shares, as there was enough selling to provide a temporary exhaustion of distribution, leading to a bounce on Tuesday. The MACD and Acc/Dist remain negative and were joined today by the Williams%R, DMI (ADX), and CCI. The Money Flow is neutral.
The Nasdaq McClellan Oscillator declined sharply to -34 and its 10% index is well below the 5% one and the zero line now, and when that occurs, the market is very unlikely to suddenly reverse for very long. The weekly stochastic dropped to 62% crossed up but coming down, daily 23% crossed and going down but the "d" is still quite high leaving room for more downside action for the next 1-3 weeks, and the hourly is at 0%, indicating a bounce may be imminent but short-lived.
The NYSE TRIN closed at a very negative 2.32, with a/d of 9/23, up/down volume 1/6, on light volume of 1.2B shares. The McClellan Oscillator dropped to -16 and its 10% index is below its 5% one. Weekly stochastic is dropping at 67% crossed up but coming down and the daily is also 23% going down as it works its way down in tandem with the Nasdaq.
The VIX rose to 34.4 and the VXN was barely changed at 52.9 but their MACDs are crossed up, indicating that the bullish momentum is over and the trend is now down. The put/call ratio is .72 and its MACD is bearish. Advisors are still not bearish enough.
The NYSE a/d line is in danger of confirming a triple top and further weakness this week would do that. The Nasdaq and Amex have lower highs on their a/d lines.
It now appears quite likely that the top is in for the 2 month rally and that we may see a series of lower highs and lower lows in the weeks to come, barring a complete change of institutional activity.
Bonds have firmed up recently while gold has maintained a high level consolidation thus far. The US dollar has been a little weak lately and is at risk of falling more severely.
Tuesday should see a bounce and depending on the market internals, it could succeed to the close and to early Wednesday or it could weaken later in the session. If instead the market opens lower, it should rebound by the close. But swing and position traders may wish to trade according to the new downtrend for most stocks and to the uptrend for gold stocks but buying only on dips, rather than chasing them.
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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