***** Technical Analysis (for March 6)*****
Arguably the most useful and popular technical indicator for a wide range of markets, from stocks to futures, is the stochastic indicator. I have been discussing the possible and expected double cross(over) of the slow and fast stochastics found at stockcharts.com, and it occurred this week. The slow stochastic has plenty of room to fall, and possibly a "stochastic drag" will occur, by which it spends a good deal of time between 40% and 0%, at which time the price of the index or stock will sink precipitously.
Occasionally the stochastic will cross back up for a third time and even rally to prior highs but much more often it will work its way down with only small bounces intra-day or just a day or two at at time as it works its way down, and finally accelerating its descent.
Using this signal with other indications, such as the weak Summation Index, weak chart patterns on all timeframes from quarterly to daily, and bearish divergences when rallies occur such as light volume, there has been a strong case for a downtrend recently.
For Thursday, the Nasdaq TRIN was a mildly negative 1.26, a/d was 12/19, up/down volume 1/2, indicating mild distribution, on light volume of 1.3B shares. The MACD worsened and is now neutral as did the Acc/Dist. The DMI remains negative, while the Williams%R, CCI, Money Flow and Aroon are neutral. The Williams%R is making a series of lower highs, a negative trend. The RSI dropped to 44.
The Nasdaq McClellan Oscillator fell to -9 with a 10% index that is below the 5% one and the Summation Index is -567. The monthly stochastic is 18% crossed up, weekly 33% crossed down, daily 44% just crossed down, hourly 14%.
The NYSE TRIN was a negative 1.22, with a/d of 3/5, up/down volume 1/2, on 1.3B shares. The Dow monthly stochastic is 13% crossed down, weekly 3% crossed down with a "d" that is not low enough, daily 8% crossed down, and hourly 9%, so a bounce Friday could occur for the Dow.
There has not been strong distribution for most of the past several sessions as some dip-buying appears, thereby delaying any bottoming formation.
The sentiment indicators are mixed as the VIX/VXN MACDs are still crossed down while the put/call ratio MACD is negative.
The Dow should have difficulty getting back to 8050-8150 resistance during any technical bounces in the next week and should test 7628 very soon. A break of that level is very probable in the first or second attempt and then 7197 will be tested.
The Nasdaq has held up better but also will have problems rallying back to 1350 and should fill the gap at 1221 and possibly 1166 as well but at a later time than when the Dow retests 7197. The blue chips have been trying to catch up with the huge decline of the tech stocks but both could fall sharply before a good tradeable bottom is reached.
There has been no panic selling as selling has been moderate, so no bottom is in sight. But panic selling and capitulation as measured by extreme readings on indicators can occur when prices accelerate to the downside.
The bond market has rallied again and interest rates are making new lows. The U.S. dollar is weak while gold has steadied but gold stocks continue to lag spot 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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