***** Technical Analysis (for December 18)*****
The markets declined in quiet trading today as the Dow closed off of its lows so today's chance for a sharp selloff has been averted so far. The Nasdaq fell to the prior low area of 1360-1365, and the S&P 500 fell to just below its 895 support to close at 891. If these levels do not hold on a closing basis Thursday, then we should head towards 1320 and 865-870, and Dow 8250, in a hurry.
The markets are oversold enough on the hourly and daily stochastics to enjoy a technical bounce tomorrow, but it should be short-lived. If we gapped down or traded down from the git-go, then we have a better chance of a longer-lasting rally. The worst thing for bulls right now is for an immediate rally that lasts for a few days right now which would only reset the indicators and supply/demand balance temporarily and would set up another big downdraft.
For Wednesday, the Nasdaq TRIN closed at a very negative 2.70, with a/d of 5/12, up/down volume of 1/6, indicating moderate distribution, on light volume of 1.5B shares. The MACD, ROC, OBV, Williams%R and Acc/Dist remain negative while the CCI and DMI (ADX) turned negative, potentially very bearish signs. The RSI dropped back down below the 50 level at 44.6.
The Nasdaq McClellan Oscillator dropped to -41, while the 10% index is well below the 5% index and the zero line, but not yet extreme enough for any intermediate term bottom. The daily stochastic is 3% with a "d" stochastic that has room to go down more which would drag the market down.
The NYSE TRIN closed at a very negative 1.90, with a/d of 1/2, up/down volume 2/7, on volume that was higher than its been for two weeks at 1.4B shares, a negative sign when the market is down.
The VIX and VXN have MACDs that are neutral and not crossed either way, while the put/call ratio is neutral to slightly negative. The advisors are too bullish at 50% compared to bears which number 25%.
The markets have been rangebound for about 3 weeks now and could remain so for another several days, however, the next major breakout move could very well be down later in December or in January. The expected "Santa Claus" rally could be muted and could come from lower prices. If we could drop fairly sharply this week, then we could rally into Christmas and a few days afterwards, but if we rally on balance for the next 2-3 days, then we could decline sharply from there, breaking 8250, 895 and 1365 with a vengeance.
Gold has become parabolic, rising sharply to $354/oz today and is overdue for a pullback, but it is in a long term bull market. Bonds have firmed up in the past couple of weeks and are in a high level trading range. And the US dollar has broken down a couple of times this year and may be on the verge of another sharp decline after a bounce.
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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