***** Technical Analysis (week ending January 30)****
The markets were relatively quiet this week, with the technical indicators worsening a bit as the major indexes were weak several days this week.
The Nasdaq TRIN on Friday, closed at a mildly negative 1.13, with a/d of 34/29, while up/down volume was 1/1, indicating a lack of strong accumulation, on moderate volume of 1.95B shares.
The Nasdaq RSI fell to 49 this week, while the MACD remained negative, crossed down. The ROC, OBV, DMI (ADX), and CCI were neutral. The Williams%R fell to a negative reading this week while the Money Flow, Acc/Dist and Aroon remained positive. Thus far, the money flow indications are that there is not strong distribution in the marketplace yet, despite the moderate profit-taking decline over the past 2-3 weeks.
The Nasdaq monthly stochastic closed at 91% crossed up, weekly 76% crossed down, daily 44% crossed down, and hourly 28% crossed up, implying a near term rally but a good chance of another drop afterwards to get the daily stochastic close to 25%.
The Nasdaq McClellan Oscillator was -30, which is nearing the oversold levels from which some bottoms were made since March, 2003. The Summation Index is at +533 but falling and needing to turn up in the next week or two to maintain a good probability of another rally later in February.
The NYSE TRIN closed at a neutral .94, with a/d of 34/31, up/down volume 8/7, on 1.6B shares. The McClellan Oscillator closed at a -48 with a Summation reading of +1215, so it has to unwind for months before turning negative. The Dow monthly stochastic is at 93% crossed up, weekly 85% crossed down, daily 35% crossed down, hourly 29% crossed up, so it is potentially nearing an intermediate bottom.
The Nasdaq and Dow 200 day moving averages are well below current index values and modestly above their 50 day moving averages, so the up trend has not been violated so far.
At least a retest of the recent recovery highs is likely, with a good chance of higher highs if the volume stays heavy or moderately heavy. Thus far, the recent decline may be resetting the supply/demand balance and the technical indicators, with continued mutual fund inflows needed in the weeks and months ahead to drive this market higher.
Some believe the all-time high for the Dow near 11,722 will be reached this year, but for now, the important level is the recent high near 10,750 and then psychological resistance at 11,000.
The Nasdaq has reached 2153 and may retest that level in the first quarter while the prior high of 2328 will be harder to attain.
Gold and silver prices has fallen for 3 weeks, with gold falling from about $332/oz to as low as $297, or about 10%, with the next support level at $394 and then $388 (the last two resistance levels on the way up to $332). The HUI level that has support is 205, and it needs to hold there if this decline is to be contained next week, otherwise, 185-188 is possibly the next support level.
The USD has traded from 86-88 over the past two weeks as it has rallied modestly from the lows near 85. It needs to close above 89 to be able to prevent another downdraft in February.
Energy complex has been weak in the past few weeks, with crude oil dropping to $33/barrel recently from $35, but has held above $30/barrel, and if it continues to do so, it should retest $35 again in later February or March, while $38-$40/barrel is still the expectation in the March to June timeframe.
Bonds have traded between 3.95% to 4.3% in the past several weeks for the 10 year note. It does remain well above the June, 2003 low of 3.07%, and most of the evidence indicates bonds and interest sensitive instruments are in a new and long term downtrend. There is still a fairly good chance that the 10 year note yield will increase to or towards the 5% level later this year.
Dr.Bob's commentaries are not to be construed as recommendations to buy or sell stocks, options, or ETF's as Dr.Bob is not a Registered Investment Advisor. 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 interpretation.
Dr.Bob's mission is to teach Technical Analysis and demonstrate a structured approach to Market Analysis, for position and swingtrading.
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