***** Technical Analysis (for April 22)*****
The market made a moderately strong rally today as the internals were positive when the market was up mildly before the runup, while the volume also picked up to 1.6B shares on the Nasdaq and NYSE.
The Nasdaq TRIN closed at a positive .52, with a/d of 2/1, up/down volume 4/1, indicating moderate accumulation on slightly higher volume. The MACD, Williams%R, DMI, CCI, Acc/Dist and Aroon are positive with the +DI and -DI nearing extreme levels on the DMI as is the CCI. The fact that the MACD and Acc/Dist have just recently turned positive does not bode well as the others are at extremes. The RSI is at 67 so it too is nearing the extreme level of 70.
The Nasdaq McClellan Oscillator rose to +46 and its 10% index is getting extreme. The weekly stochastic is 73% crossed up, daily 99% and hourly 98%, so a little more upside is possible but then at least a correction should occur.
The NYSE TRIN closed at a positive .50, with a/d of 25/9, up/down volume 5/1, indicating moderate accumulation. The McClellan Oscillator is nearing extreme levels now at +59 while the 10% index is already at extremel levels. In a bull market, these extreme levels indicate very strong momentum and can stay relatively high for weeks.
The question is whether this is a bull market or just a strong bear market rally.
The VIX fell to 23.5 and the VXN to 33.6, as their MACDs continue downward and crossed. The put/call ratio rose to .88 which may indicate some are believing a top is near and therefore this reading is a positive one from a contrarian view in the short term.
Today's action does not qualify for a "large move within 4 sessions" signal from yesterday's small McClellan Oscillator changes. Perhaps we will see a very large move and then a negative reversal, or just a large move upwards for a day.
The Dow could break out above 8522 easily if the internals are very strong during that move, and then resistance would be at 8800. The Nasdaq did indeed break out above 1430 on a closing basis and has resistance at the recent high of 1467 and then 1521.
There is a lot of optimism in the media and bullish forecasts by Wall Street analysts. I do not yet see enough signs of a new bull market and consider this a bear market rally which ultimately will fail just as the other half dozen have in the past 3 years.
It would take heavy volume rally days for several days to change my view, and though the selling dissipated recently, leading me to expect another retest of Dow 8522 and Nasdaq 1425 at a minimum, a breakout above those levels does not insure an intermediate term rally, let alone a new bull market.
A heavy volume breakout above Dow 9077 and Nasdaq 1521 might change the bearish scenario.
But we are nearing some very extreme levels (on the technical indicators) which are usually more indicative of a top than a bottom, unless of course we are in a new bull market.
Fundamentally the S&P 500 trailing P/E ratio is 30 while the next 12 months P/E is about 15, so using the last two quarters and next two quarters estimated earnings, we are at about a P/E of 22, so stocks are not yet cheap since the average P/E historically is 16 and the average P/E at bear market bottoms is 8-10.
Tomorrow I look for a gap up opening for the Nasdaq and higher prices immediately on the Dow and S&P 500, and with very positive internals, we should trade much higher, but how long before selling takes over?
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.
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