***** Technical Analysis (week ending February 6)****
The markets were relatively quiet this week again, with the technical indicators improving a bit as the major indexes rallied on Friday.
The Nasdaq TRIN on Friday, closed at a positive .63, with a/d of 3/1, while up/down volume was 5/1, indicating strong accumulation, on moderate volume of 1.85B shares.
The Nasdaq RSI rose to 50.5 this week, while the MACD remained negative, crossed down. The ROC, OBV, DMI (ADX), Acc/Dist and CCI were neutral. The Williams%R improved to positive this week while the Money Flow and Aroon remained positive. Thus far, the money flow indications are that there has not been 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 75% crossed down, daily 36% crossed down, and hourly 99% crossed up, implying a brief very near term drop but a good chance of the rally continuing afterwards to get the daily stochastic close to cross up.
The Nasdaq McClellan Oscillator improved sharply to -16. The Summation Index is at +345, and needs a rally day or two early this coming week to stop the decline, and a reversal before reaching the zero line is all-important to maintain a good probability of bona fide rally in February.
The NYSE TRIN closed at a positive .70, with a/d of 4.1, up/down volume 6/1, on only 1.45B shares, so accumulation was on light volume. The McClellan Oscillator closed at a -23 with a Summation reading of +986, so it has a chance to turn back up in very positive territory. The Dow monthly stochastic is at 96% crossed up, weekly 92% crossed down, daily 66% crossed up, hourly 98% crossed up, so it is relatively stronger than the Nasdaq.
The Nasdaq and Dow 200 day moving averages are well below current index values, 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 is 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 had fallen for 3 weeks until Friday, with gold falling from about $432/oz to as low as $394, or about 10%, with the next support level at $388. If spot gold can close above $405 for a few days in a row, then it may not need to retest $394 or the $388 support levels. 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, and Friday's weak action implies the odds are lessening for a close above 89, or even above 88. If the USD is weak early this week, then it may retest the 84.5-85 level and ultimately work its way down to 79-80 from February to March. In the meantime, it could trade between 85-86.5.
Energy complex has been weak in the past few weeks, with crude oil dropping to $32/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, but for the time being, it may stay rangebound between 3.9% to 4.3%.
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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