***** Technical Analysis (for March 21)*****
On triple witching, the Dow rose sharply to close at 8521 as it nears resistance at 8600, after appearing to look a little tired on Thursday. The blue chip rally helped other stocks on the Nasdaq as well.
The rally from the March 12 lows has been attributed to the Iraq war as there is relief that the uncertainty is over whether there will be a war or not and if it will be over quickly or not.
The technicals changed dramatically last week as the weekly stochastics crossed up on Wednesday and the McClellan Oscillator rose sharply on Tuesday, causing most technicians to "trade with the trend," for the short term at least. The overall volume has been moderately higher than in past months but it has not yet risen to heavy levels of over 2.2B, which is not to say that it cannot happen but until it does, it may limit the duration of this rally.
For now, however, the momentum is positive and those who have missed most of this rally might end up buying the dips. The technical indicators such the McClellan Oscillator and daily stochastics tend to (though not always) unwind rather than reverse sharply down when they get this extremely positive. Eventually there will be bearish divergences and possibly double tops (or lower highs) occurring.
Resistance for the Dow is at 8600, then 8800, with a chance for the Dow to retest the 9050 area (9043 and 9077 were prior highs) and the S&P 500 is right at resistance at 895, then its at 915 and then 940 while the Nasdaq has filled the gap at 1420 and may have resistance next at 1467, then 1521. A Dow decline of 100-150 points could possibly be a resetting correction that would set the stage for another advance, taking out 8600.
The Nasdaq is above its 200 and 50 dmas while the Dow and S&P 500 are above their 50 dmas. The majority of technical indicators are positive, with the MACD being very positive. Usually the MACD is positive for a minimum of 2-3 weeks when it gets this positive and it has been crossed up for 7 sessions thus far.
The Williams%R, CCI, DMI, Money Flow and Acc/Dist are quite positive while the OBV improved to neutral. The Aroon remains neutral and is expected to turn positive in the next day or two.
The Nasdaq McClellan Oscillator rose to +47 and the NYSE Oscillator reading is at +50, both being moderately extreme levels, hinting at the need to reset with a market decline early this coming week. Technically, if this market is to continue its upward action, a day or two of profit-taking is desirable at this time which would bring the Oscillator readings down to about +20 to +30, before another assault on the +50 to +60 level, preferably on much heavier volume.
The Nasdaq RSI is at 64.9 and 70-75 has been the area of many prior tops. It could decline to 55-60 and then rise again if we get a correction now.
The VIX MACD is crossed down, a positive reading while the VXN MACD is neutral. The put/call ratio MACD is giving a negative reading as is the Investors Intelligence survey. But sometimes the sentiment readings can be right for a while when the momentum is strong, only to be a good contrary indicator later. Sentiment indicators are a bit better at signalling bottoms of markets than tops.
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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