***** Technical Analysis (May 21)*****
The market paused today with very little change by the close as the Dow was up fractionally percentage-wise (25 points) while the S&P 500 was up 3 points and the Nasdaq was down 2. The market had been weaker earlier but sellers weren't able to accelerate the decline and a modest rally later turned the Dow up and trimmed the loss for the Nasdaq and the tie-breaker was the S&P 500 which was barely up.
The action today implies that in the near term the market could make another rally attempt and if the internals are positive enough, it could rally the Dow back up to the 8750 area and the Nasdaq to 1530-1553. But the majority of technical indicators have a good chance of either making lower positive readings or bearish divergences during the next rally.
The Nasdaq McClellan Oscillator changed by only 3 to -15 from -18, implying a large move within 4 sessions again. The NYSE Oscillator rose to -5 from -11 and could turn positive if we are up tomorrow.
One problem for the bulls is the MACD which just turned negative three sessions ago and is becoming more negative now, and it usually doesn't reverse right away. Also the ROC was indicating bearish divergence for 2 weeks now and the daily stochastics are crossed down. Additionally, the DMI and Money Flow are barely positive and one more down day could turn those negative. The RSI is holding above the neutral 50 level but by only 2 points.
The Nasdaq could find some support at around 1440-1450, which is where the 50 dma will be at in a few days, if the index does decline in the coming week. Dow may find support at 8250.
Resistance may be at Dow 8750-8800 and Nasdaq 1553 was the recent high that may be difficult to penetrate.
The VIX/VXN MACDs remain crossed up while the put/call ratio is giving a neutral reading. Advisors and investors remain too bullish as evidenced by the Investors Intelligence and AAII data.
The TRIN for the NYSE was positive at .74 while the Nasdaq TRIN was a mildly negative 1.25. Volume was moderately light at 1.4 and 1.6 respectively.
The market hasn't fallen sharply despite some negative news in the past few days, implying that there are dip-buyers still being active but recently there has been a lack of strong accumulation as was occurring during part of the last two month rally.
The USD has been very weak in the past few weeks which was seen as a positive for our trade deficit and companies with international exposure but longer term a USD in its own bear market will hurt the US stock market.
Gold has been rallying sharply in the last several weeks and might get a bit more parabolic as the trend remains up, If it doesn't break out above $389 then it could reverse back down for a while but it seems to be experiencing a stochastic "pop" now and can see higher prices in the short term, to or towards that $389 level.
But most of the rally may have already occurred so new buyers may need to be careful and short-term oriented, because we have seen how sharply gold prices can fall when they reverse and a possible double top reversal would result in a severe downtrend.
Bonds have rallied sharply recently as well as there has been a perception that interest rates will stay low for now and the FRB could lower rates again in the near future. The Fed funds rate is at 1.25%, a 40 year low.
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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