***** Technical Analysis (for April 7)*****
"Good war news" may have pushed the Dow to retest its recent level near 8522, missing it by only 2 points very early this morning, but despite strong internals and up/down volume most of the session, the index weakened and printed a bearish reversal today, possibly a key reversal.
The Dow will need to prove that the reversal was only profit-taking and not an important technical signal by rallying Tuesday and/or Wednesday to take out that 8520 top from today. Otherwise, a double top (which it has in the short term right now) or a higher high that fails quickly, will be put in, which has very bearish implications.
The rumor as I write this is that Saddam Hussein and his sons may have been killed from our attack, and that may ramp up this market once again.
The problems is that the adage "buy the rumor, sell the news," may prove out this time as many technical indicators such as the slow and fast stochastics, CCI, OBV, ROC, and Acc/Dist are showing negative divergences now.
These signals remind me of many other times in this secular bear market when bearish divergences showed up, which led to much lower prices in the following 1-3 months. Of course, that may not happen this time, but it should be noted.
The reality is that if this is a "war rally," then there will be pressure on prices once it ends and the sobering thoughts about the weak corporate earnings/guidances, economy, and the cost of the war on terrorism to our budget deficits, start.
The media rationalizes and tries to explain why prices move up or down in simplistic and naive ways. This rally does have strong institutional support as their is not strong accumulation occurring. While the market can move a bit higher, unless the institutions accumulate heavily, the rally will fail, and could fail miserably as we are nearing unfavorable seasonality with bearish divergences on the indicators.
The Nasdaq TRIN closed at a mildly positive .88 after having been under .30 in the first hour of trading. The a/d ended up 19/12, but up/down volume was only 9/5, on light volume of 1.5B shares. The RSI was little changed at 55.9, while the Rate of Change, OBV, and Acc/Dist are now negative. The MACD remained neutral which is significant considering it has had every chance to turn positive as the Dow and Nasdaq have rallied from 8069 and 1348, respectively.
The Nasdaq McClellan Oscillator rose to +32 and its 10% index remains above the 5% index. The Summation Index rose to -183. The weekly stochastic is 50% going sideways and the daily is 77% sideways.
The NYSE TRIN closed at a neutral .91, with a/d of 5/3, up/down volume 9/5, on light volume of 1.45B shares. The weekly stochastic is 54% crossed up and daily is 79% crossed up. The McClellan Oscillator rose to +39 but it was +47 a week ago when the Dow was at 8285, which is starting to be seen as negative divergence.
The Nasdaq has resistance at 1465 and it failed to hold the breakout above 1425 today, which it breached by 5 points.
Thus, the Nasdaq as well as the Dow did not act well today after the initial burst up.
We shall see how strong and lasting the next "war news rally" is, as Saddam and his regime are being toppled now. If the volume does not increase to over 2.2B or so, then the rally will probably fail.
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.
NEW TIME Announcement: Dr.Bob hosts Stocktimers meetings on Sunday nights to discuss the end of week Market Analyses, especially Technical Analysis, at AOLs private chat room, from 6-7 pm PST. The Stocktimers AOL meeting is in the private chat room. Or you may Instant Message Drbob512 to locate him.
|
