***** Technical Analysis (for December 6)*****
From a sentiment standpoint, we technicians knew the market might be in trouble when the media analysts were touting the definite end of the bear market as of October 9 during the past few weeks while the technical signs did not support that contention. While the market has a small possibility of rallying to a higher high above 9077 on the Dow, it is much more likely that we are going to either have a new downdraft or a trading range and then a downdraft.
We did get oversold enough on Thursday to warrant a technical bounce and we got one on Friday, which could carry through on Monday and/or Tuesday. If that occurs, then more weakness should start by mid-week, but if we get significant weakness on Monday, then it would be a bearish technical sign.
For Friday, the market internals were fairly positive as the up/down volume was positive all day with the Nasdaq a/d at 17/15 and up/down volume at 2/1 on light volume of 1.5 shares, a negative sign for the bulls as it shows very light accumulation.
The Nasdaq MACD got more negative while the DMI (ADX) worsened significantly to neutral, which it hasn't been for several weeks. The rate of change can be interpreted as neutral to negative. The Williams%R and CCI are neutral while the Money Flow is slightly positive but the Acc/Dist is slightly negative.
The Nasdaq McClellan Oscillator improved to -11 and the 10% index is below the 5% one and right at zero, so these are interpreted as possibly resetting before going lower. The daily stochastic is 52% going down while the hourly is 56% going up, so a bounce Monday could occur.
It should be noted that the weekly indications such as DMI (ADX), CCI, rate of change, and Aroon are still negative.
The NYSE TRIN closed at a neutral 1.05, with a/d of 19/12, up/down volume 7/4, on 1.2B shares, so there was little conviction to accumulate stock. The Dow daily stochastic is 46% going down and hourly is 45% going up. The McClellan Oscillator is +8 and trying to hold above zero.
The US dollar weakened and gold rose sharply intra-day to close modestly higher at $326/oz. The latter has resistance at $329, but the stochastics are crossed up and have more room, though it is likely to have some profit-taking next week.
The stock market has appeared to have topped out and could be making its way back down in a choppy fashion for now leading to a sharper decline next year. The Dow has lost much momentum as have the other major indices and they will be hard-pressed to rally strongly. While we could have a bounce early next week, the market has started to break down technically from overbought conditions and sentiment that was too bullish.
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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