***** Technical Analysis (for February 7)*****
Slowly but surely the market technicals keep deteriorating and stocks grind down. We are near term oversold with the slow stochastics experiencing the stochastic "drag" I've been talking about, the opposite of the stochastic "pop."
Bear markets can see stochastic drags for 2-3 months at a time, with "k" staying betwee 0% and 40%, on the dailies, and thus far we've had about one month of it. The weeklies are crossed down from high levels, indicating that the "drag" will drag the weeklies down with it, until the weekly stochastics go well below 25%, possibly near 0% ultimately, as has occurred before during this bear market.
The Money Flow just took a turn for the worse (if you are long stocks) as have others recently (e.g. Aroon), and the negative momentum is not likely to change drastically or reverse any time soon. Any rally now will likely be ephemeral as stock prices are moribund.
Breadth momentum as evidenced by the McClellan Oscillator and Summation Index are very bearish for the Nasdaq and NYSE, and have been for a few weeks after indicating some bearish divergences as a red flag in December and early January.
The Nasdaq McClellan Oscillator closed at -40 while the NYSE Oscillator is at -47, so both are fairly extreme but can get more so and can also spend a lot of time between -20 and -70 historically in major downdrafts.
As I've mentioned in the past, the market has needed to show that it could stop the technical bleeding by reversing up with heavy volume which it has failed to do.
The oversold rallies will continue from time to time but most of the time it will be short-lived bounces. Every once in a while it will be a sharp rally but they will fail for the foreseeable future until we get a bona fide selling climax or capitulation.
The sentiment indicators portend more weakness for the next few weeks at a minimum. The VIX and VXN and advisors indications are particularly bearish.
The Nasdaq has gaps at 1221 and 1166, which are very likely to fill, and soon. Ultimately the index should retest 1108, while the Dow can retest 7197 and the S&P 500 768.
But we can easily have a technical rally before then and a few bounces as well.
The U.S. dollar selling pressure has dissipated for now but the long term trend is down. Gold is holding up above 359 support and may be consolidating before another runup, while gold stocks have lagged badly for the past few weeks as there may be doubters that spot/comex gold can maintain high prices.
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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