***** Technical Analysis (May 20)*****
An early bounce gave way to weakness mid-session and then a late rally moved the Dow from down over 70 points to being down only two points. The Nasdaq and S&P 500 were almost unchanged as well.
The technical bounce may continue tomorrow, Wednesday, as the hourly stochastics are 24%/16%, for the Dow/Nasdaq, respectively, and are crossed up. But the dailies are crossed down with plenty of room to fall for both the "k" and "d." The dailies are 47%/56% crossed down.
The Nasdaq McClellan Oscillators only changed by 4/2, respectively, for the Nasdaq/NYSE, at -18/-11, so it is signalling a large move within 4 sessions again. After the market rallies a bit, the next move should occur then. If the MACD, ROC, and Acc/Dist (which are all negative) are any indication, the move might be down.
The bulls need to see those technical indicators reverse back up with authority in order to prevent a reversal trend back down and to reinstate the bullish momentum of the last two months.
Today, the Nasdaq TRIN closed at a mildly negative 1.17, with a/d of 7/8, up/down volume 3/5, on moderately light volume of 1.7B shares. Thus, while the Nasdaq was only down one point, the internals were modestly negative.
The Nasdaq DMI and Money Flow are losing positivity and are barely positive with another weak day likely to turn them negative. The RSI was little changed at 52.9.
The NYSE TRIN closed at a negative 1.51, despite being positive at 9/7, the up/down volume was 7/8, indicating a lack of accumulation despite positive breadth, and on moderately light volume of 1.5B shares.
The VIX/VXN MACDs are both crossed up clearly now and their RSIs are also rising up clearly now, a negative sign. The put/call ratio was unchanged at 1.00 but its MACD is neutral, not positive. Advisors are 54% bullish vs. 24% bearish, a negative reading.
The McClellan 10% indexes are below their 5% indexes but above the zero line so they are negative but not decidedly so yet.
The bulls need to see technical signs that this is just a correction before another major runup, and a heavy volume rally to break above Dow 8800 would probably do that. A rally getting to 8600-8700 without conviction and accompanied by negative divergences would be quite bearish.
The bears need to see a continuation of the negative MACD readings and to be joined by other negative readings from the technical indicators such as the DMI and Money Flow.
Resistance is at Dow 8800 with support at 8250. Nasdaq has resistance at 1553 and support may be at 1430 after 1480.
The market internals intra-day, especially up/down volume and TRINs, can provide good signals as to the closing trend.
Is this "sell in May and stay away," or just a normal correction within a major up trend? Odds may favor the former as the bullish momentum needs to reassert itself or risk a major downdraft in the months to come. In the near term, we should see a bounce or rally but then another test occurs from a technical standpoint because the indicators haven't gotten back up to their very positive readings a few weeks ago.
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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