***** Technical Analysis (for February 21)*****
Friday's rally brought the Dow up to 8018 and the Nasdaq to 1349, but remember that in order for the daily charts to become bullish, we need to see a close above Dow 9077 and Nasdaq 1521. In the meantime, the charts are telling us that the bear market is not likely over, and that while technical bounces and rallies can squeeze short positions, the next targets are a retest of lower price levels, such as Dow 7628 and Nasdaq gaps at 1221 and 1166.
The Nasdaq gap above at 1420 has a chance of filling but that fill could provide resistance, and resistance comes first at 1360 and 1380. The Dow has resistance at 8050, 8150, and 8250, so it has much to prove to invalidate the fibonacci retracement breach below 7924.
The Bollinger Bands are compressing again, and the last time that occurred the markets fell sharply. The a/d line continues downward and the new highs/new lows are also weak.
The McClellan Oscillator for the Nasdaq rose to +15 from zero while the NYSE Oscillator reading rose to +10. Both are going to be hard-pressed to stay above zero because the Summation Indexes have made lower highs and lower lows, with the Nasdaq Summation at -579, a very negative reading considering the lower highs/lows. Historically the sharpest declines occur when the Summation is at these levels after having topped out.
The quarterly stochastics are important to view from time to time to get a longer term picture, and they appear very bearish. The weeklies are crossed down while the dailies are crossed up at mid-way points while the hourlies are quite high. In order for the weekly stochastics to be reversed, the market needs a strong rally this coming week on heavier volume.
The e-wave structure appears to be nearing an ending of the corrective waves up which may lead to another impulse wave down. Longer term, the Grand Supercycle is over and it takes a longer time to complete the last wave down and in the meantime, you have intermediate waves down that are larger than their corrective waves up.
The fundamentals also are quite negative as the valuation models are indicating that this market is 2 to 3 times too expensive.
Taking a short term view, the markets are overbought but could have a little more time of strength before reversing. The VIX MACD is crossed down, a positive sign while the MACD, Williams%R and Acc/Dist are giving positive readings as well for the Nasdaq.
On the other hand, the OBV, ADX, and Aroon are negative and the CCI, Money Flow and DMI are neutral. All indices are below their 200 and 50 day moving averages, though the Nasdaq is approaching them. Unfortunately, each time the Nasdaq has risen above them during this 3 year bear market, it has been a time to sell (and sell short) rather than a tiem to buy, as they turned out to only be resetting bear rallies.
The market could see some strength early this week again, and then start to reverse by mid-week. If we drop modestly in the early part of the week, then we could rally in the second half of the week, leading to a sharper decline the following week.
Look for resistance levels and support levels, the latter of which are weak.
Gold has been steady after having had a sharp correction, presuming it is still in a long term bull market. The U.S. dollar has started to slip again and it is only a matter of time before it falls below 99 once again.
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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