***** Technical Analysis (for March 7)*****
The slow stochastics are still crossed down while the selling pressure dissipated on Friday after early weakness as geopolitical news (i.e. reported capture of Bin Laden's terrorist son) or rumors helped stocks or gave an excuse to cover shorts.
The market certainly tests your patience at various times as the trend is rarely straight up or down but has periods of consolidation from the prior intermediate term move before that move continues. Thus, the market has reversed trend since rallying in October and November, making lower highs and lower short-term lows, but has had a couple of weeks of strength in early January and again in February-March.
The Nasdaq McClellan Oscillator changed by only 1 to -8, thereby signalling a large move within 4 sessions. The NYSE Oscillator is at +2 while the 10% indexes are mixed for those two.
The Nasdaq TRIN was a negative 1.41, with a/d of 7/8, up/down volume 5/8, on light volume of 1.4B shares. The MACD, Williams%R, CCI, and Aroon remain neutral while the Acc/Dist improved to neutral and the Money Flow actually improved to slightly positive. The DMI remains negative and the RSI is at about 45.
The Nasdaq weekly stochastic is at 34% crossed down while the Dow's is at 12% crossed down. The Nasdaq dailies are at 47% crossed up and the Dow's is at 34% crossed up so another bounce or short term rally early to mid-week is possible but another move down is likely to follow and the Dow has not quite retested 7628 nor 7197.
The NYSE TRIN was a positive .67, with a/d 9/7, up/down volume 9/5, on light volume of 1.35B shares.
The sentiment indicators are mixed as the VIX/VXN MACDs are crossed down but that gap is narrowing. The put/call ratio MACD is negative while the Investors Intelligence shows just 3% more bullish than bearish, giving a slightly negative reading.
Crude oil finally reached my forecast of $39/barrel in February instead of January and spot gold went above $370-375/oz that was discussed here in January and even went to $389 but has since fallen sharply with gold stocks acting worse technically.
I still believe that the first 6-9 months of this year will be weak for stocks and that not only will there be a retest of the 7197/786/1108 lows for the Dow/S&P 500/Nasdaq probably in the first 6 months of the year, but a break below those levels.
But the moves won't be straight down and there will be technical rallies mixed in between the technical bounces and downdrafts.
Currently the trading range is intact as most await the geopolitical developments, but ultimately there are larger issues than the recent and upcoming terrorist/war-related events/news.
The Kondratieff cycle indicates to us that we are in the "winter" season that will take the economies and stock market much lower in the next few years and valuations tell us that either earnings have to rise by 50-100% or prices will have to decline sharply to get to "fair" valuations. Regression to the mean paradigm tells us that P/E's will eventually get back down to 10-15 for the S&P 500.
Then we have Elliot Wave Theory which indicates that we are only in the midst of the third wave (down) and that we have another wave down due after a technical rally for the fourth wave, as the Grand Super Cycle ended in early 2000 and is due to end in several years from now.
These appear consistent with long term technical charts and indicators, such as the quarterly stochastics.
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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