***** Technical Analysis (for April 8)*****
The Dow and other major indices traded in a narrow range today as few committed to either the buy or sell side as they await the final outcome of the war in Iraq. The Dow thus far has a double top at 8520-8522 and the Nasdaq has it at 1425-1430, which is kind of eerie. If these are not taken out in the next week or so, then we will probably have a major move down.
Some major bearish divergences are showing up, such as the Rate of Change, On Balance Volume and Acc/Dist. The ROC is quite reliable when it shows bearish divergences though it is sometimes a leading indicator by a few weeks as in November last year. I am waiting to see confirmation of these negative signals, which would be the Money Flow, DMI, MACD, and McClellan Oscillator/10% index, to turn negative or show bearish divergences of their own.
Another indicator to watch is the Bullish Percent Index and its RSI. This indicator is starting to look toppy and it will take a very strong market to keep it from turning down and portending lower prices in the short-intermediate term of 2 weeks to 2 months. It is available at www.stockcharts.com as BP.
There are a variety of e-wave interpretations now, with some expecting a run to at least 9000-9077 on the Dow, and others expecting this rally to fail within the range of 8522-8600, and there are those who believe the top is already made in the form of a double top at 8520-8522.
For Tuesday, the market technical indicators were unchanged except for the RSI which dropped a point to 54.
Volume was light once again and the major indices had mild distribution occur, with the up/down volume 4/9 and 4/7 on the Nasdaq and NYSE, respectively.
The Nasdaq and NYSE McClellan Oscillators dropped to +23 and +26, respectively, while their 10% indexes are well above zero and their 5% indexes, so there remains a good chance of another rally attempt.
Weekly and daily stochastics are mixed and are not decisively crossed either way.
Sentiment indicators are also mixed, with the VIX and VXN MACDs giving positive signals though the raw readings are starting to get extremely low. The put/call ratio remains neutral. Advisors are too bullish according to Investors Intelligence, a negative sign.
The first quarter of this year saw the Dow fall to 7416, a bit shy of my 7197 retest forecast, and the Nasdaq did not come as close to its October, 2002 low of 1108, as it did not fill the gaps at 1166 and 1221.
This does not mean they will not do so in the second quarter of this year, and I believe they will do so at a minimum.
Resistance now is at 8522, then 8800 for the Dow and 1430 and 1465 for the Nasdaq, and both indices need to break out above those first resistance levels (in the next 1-2 weeks, in my opinion) to reassert bullish momentum, otherwise, we should see initially a decline to 7950 and then 7416 for the Dow, and 1260 for the Nasdaq.
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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