***** Technical Analysis (week ending May 14)****
The markets were basically flat this past week with most of the internals and technical indicators remaining negative thereby setting up the possibility of a technical bounce this coming week due to its very oversold condition in the shorter term. But this type of technical damage is not likely to reverse and after any technical bounces or one technical rally, the market is likely to make a lower low, as the path of least resistance is down.
The McClellan Oscillator improved to -38, a moderately negative reading, and it's moderate reading means it could bounce or go back down towards the -60 level again. The Summation Index fell to -689 and has been known to get to the -600 to -800 level during most downtrends and can sometimes get to -1000, especially during panic selling leading to a climactic bottom. If the Summation does not go much lower this time, the sharpest decline will be delayed to the Fall.
The Nasdaq monthly stochastic dropped to 76% uncrossed now and likely that it will not go straight down from here but will probably fall a little more but then will go sideways or in a range before falling sharply later this year. The weekly rose slightly to 9% but the "d" still has room to the downside in the weeks to come, daily is 14% and could experience a "stochastic drag" below 25% for many days.
The Nasdaq remains below its 200 dma as well as its 50 dma, a very bearish development, and could be signalling the "cross of death." The RSI rose slightly to 38. The MACD, Williams%R, DMI (ADX), and Aroon remain negative while the CCI, Money Flow and Acc/Dist improved to just barely neutral but close to negative. The Nasdaq is threatening to close below its March low of 1896, and doing so would be quite bearish for the intermediate term.
Favorable seasonality has ended (April) and the time period of May to October is typically weak, especially after a multi-quarter rally leading up to it, hence the expression, "sell in May, and stay away." There should be a multi-week Summer rally when the market get too oversold or after a selling climax and key reversal.
The Dow monthly stochastic dropped to 79% crossed up, weekly rose to 17% crossed down, daily rose to 23% uncrossed, hourly 71% crossed down, a negative reading for the short term and a bearish reset. The NYSE McClellan Oscillator rose to -23, having gotten to that -80 area I wrote about last week, and the Summation Index continues downward at -726, joining the Nasdaq Summation below -600, which indicates that the largest point declines and percentage declines will be occurring unless a trend reversal occurs in earnest.
The USD closed above 91 but its rally has stalled for the moment. Short term it may have a little more upside as bond rates have risen sharply, which usually helps the greenback in the near term. Bond rates ended near 4.8%, having taken out last year's high of 4.65%, a bearish development for bond prices. Gold was pretty flat this week. The HUI has support at 154, a little more than 20 points away.
The way the market is acting, the blue chips will probably need to have sharp declines before we have a tradeable bottom. Also, intermediate term indicators will need to get more oversold and there is a possibility of a selling climax after the market trades lower. Those will be some of the signs I will be looking for before considering the market is due for a trend reversal.
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. There are many other TA structures, strategies and systems.
Dr.Bob no longer hosts Stocktimers meetings on Sunday nights at AOL.
***** TA Update (for week ending April 23) *****
The markets were slightly up this past week with most of the internals and technical indicators the same or slightly more positive, in the short term but in the intermediate term the technical indicators remain negative on balance.
The Nasdaq TRIN closed Friday at .47, a/d of 7/8, up/down volume almost 2/1, indicating some accumulation in selected stocks but not in a majority of issues, on moderate volume of 1.95B shares. Its a/d line thus far has lower highs and lower lows. The McClellan Oscillator improved to +1, and needs to turn back up strongly or risk another downturn which could portend a sharp decline in the weeks to come, as the Summation is below its zero line at -142.
The Nasdaq monthly stochastic rose to 90% crossed up but the "d" is nearing the "k" making it look toppy, weekly rose to 60%, uncrossed now, daily 81% barely crossed up now as it too improved, hourly 96% crossed up but its "d" is very high and therefore strong buying is necessary in the next day or two in order to prevent a short term downtrend. The index has risen to above the 50 dma again and needs to increase the distance or risk another crossover. The RSI rose above the neutral 50 level again to 56. The MACD, OBV, and Williams%R improved to neutral this week while the DMI (ADX), Money Flow and Acc/Dist improved to positive. The ROC, CCI and Aroon remained neutral.
If this trading range is to hold and to prove that it is a choppy market rather than the start of a major leg down, the next rally needs to have stronger technical signs, otherwise it will be a technical bounce or rally that will fail badly, leading to much lower prices for Nasdaq stocks.
Favorable seasonality is close to ending (April) and the time period of May to October is typically weak, especially after a multi-quarter rally leading up to it.
The Dow monthly stochastic rose slightly to 92% crossed up, weekly declined slightly to 71% crossed down, daily 81% crossed up, hourly 90% crossed up. The NYSE McClellan Oscillator is -35 and the Summation Index continues downward at +19, threatening in the next day to join the Nasdaq Summation below the zero line, which would be a confirmation of a new bearish trend.
The question is whether the current rally is another leg up or just a resetting of the supply/demand balance and technical indicators. Bulls believe this is a normal correction in a secular bull market. The action of the last 2-4 months support the latter case more than the former. We should know even more in the next week by the action of the indices, market internals, and divergences, if any. If any strength weakens or if the rally is on light volume, it would not be positive. In the past week there was a strong rally day on heavy volume but it has not sustained that volume on subsequent rallies.
The USD broke out above resistance at 89 1/2 and next resistance is at 92, and it is near term overbought. If it can close above 92, which is possible in the next 2 weeks, then 94 could be tested. Bonds rose for part of this week and the 10 year note yield rose to almost 4.5% and seems likely to retest last year's high of 4.6% at a minimum in the next couple of weeks.
Gold stabilized just above $390 and silver went to $6 this week, and gold came very close to retesting 388 level, with a chance to break below 388 if the USD rallies to or above 92.
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.
Dr.Bob no longer hosts Stocktimers meetings on Sunday nights at AOL. |
