***** Technical Analysis (for February 4)*****
The market is hanging on for dear life to prevent a sharper selloff, as the market rallied modestly to trim its losses after the early morning drop. The Dow fell to 7934 and the Nasdaq 1292 before rallying to close at 8013 and 1306, but both were down, and the S&P 500 is acting poorly, finishing at 848.
The Nasdaq has a gap above now at 1318 and any rally attempt on Wednesday or Thursday should try to fill it but that will probably be the end to it. There is no assurance that that gap will fill but the market is once again near term oversold and unless panic selling takes place, we are likely to see a technical bounce on Wednesday.
The Dow was able to close above the psychological level of 8000 but it won't last long, barring some unforseen good news event. Technically the Dow should retest 7934 in the next few days and then break below it on the way to 7600 support, which is weak support. Stronger support is at the retest area of 7197.
The weekly stochastics and Summation Index remain very negative as are the MACD, DMI, ADX, and Acc/Dist. The Aroon just turned negative, and when it does that, it usually means the market is very oversold and will have a bounce in the next day or two, and then follow through to the downside. The other major indicators remain negative and the RSI dropped to 37.7.
The sentiment indicators remain negative on balance and the market has been grinding down once again as we are clearly in a secular bear market, not a cyclical one.
Regression to the mean tells us that either earnings have to double or prices have to come down in half because the P/E ratio of the S&P 500 is about twice the historical norm and three times that of the average P/E at market lows.
The Kondratieff winter continues and we may only be halfway through it. Our $32 trillion in debt will take more time to be cleansed out of the system.
The failure to set the first of a series of higher highs on the Dow and S&P 500 portended another impulse wave down, along with the evidence of bearish divergences from many indicators/indications.
The U.S. dollar fell sharply today to a March reading of 98.99, and that breaks support once again. Gold rose sharply, in the nick of time, for gold stocks, and it has not only retested 379 but taken it out. Amazingly, gold stocks are not yet very overbought and could go a bit higher, but they have been lagging London spot and comex gold.
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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