***** Technical Analysis (for April 25)*****
Wednesday's retest of 8522 and 1467 for the Dow and Nasdaq resulted in a failure to take those levels out by the next day, Thursday, thereby increasing the chances that the following days would be weak. Thursday and Friday were down and we shall see if the near term oversold condition will result in a rally early this coming week.
The level of bullish sentiment is quite high now from both the AAII and Investors Intelligence. Even Ralph Acampora, a well-known technical analyst came out this week on CNBC with a bullish forecast for the rest of this year and stated that there was a good chance that the bear market is over after the July, 2002, October, 2002, and March, 2003 lows have held up. From a conrarian view, this is negative for the market in the intermediate or long term while in the short or near term, they could be right for a bit longer.
The Dow currently has a triple top formation possibility and if it does not take out 8522 in the next week or two, it is likely to complete, and result in a bearish reversal. The Nasdaq did take out 1430 resistance and has new resistance at 1467 and then 1521, if it can get there.
The Dow is barely below its 200 dma while the Nasdaq and S&P 500 are above theirs. The real test for the Dow is whether it can hold above the moving average which is now rising and could provide support and then the Dow could turn back up bullishly.
The technical indicators are mixed as usual with the breadth and breadth momentum indicators still positive as are the MACD, DMI, CCI, Acc/Dist, Aroon, and RSI, for the Nasdaq and S&P 500, on the dailies. The McClellan Oscillators have fallen substantially (from +51 to +21 for the Nasdaq and from +59 to +17 for the NYSE) and might rally early this week as they have reset but one needs to look for the possibility of lower highs now. The ROC, OBV, Williams%R and Money Flow are neutral.
The weekly stochastics are still crossed up while the dailies are mixed and the hourlies are oversold in the near term.
The Dow bounced back up from above 8250 while the Nasdaq did the same near 1430, so bulls may get a reprieve but it might be temporary.
The VIX and VXN are still crossed down but their raw readings have stopped falling, so we shall see if they cross back up in the next 1-2 weeks, thereby signalling a downdraft.
The market seems likely to rally again from near term oversold levels and bulls will want to see a heavy volume rally to take out resistance levels, while bears are looking for light volume rallies or breakouts which might not have conviction.
There remains the real possibility that we are nearing a top and that the next major move will be down to at least Dow 7950 in the second quarter. If that were to break then 7600 would provide some support.
In any event, technicians are mixed in their views, but my TA interpretation is basically unchanged as I remain skeptical of this latest rally which may turn out to be another bear market rally that fails for the bulls.
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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