***** Technical Analysis (week ending May 21)****
The markets were mixed this past week with most of the internals and technical indicators improved modestly but enough for 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 for the short-intermediate term of 2 weeks to 2 months.
The McClellan Oscillator crossed up to +1, and will need to prove that this rally is more than just a technical one by rising above +30 on on heavier volume than we've seen on prior rally days recently. The Summation Index fell to -813 because the index was weak earlier in the week. If the Summation does not go much lower this time, the sharpest decline will be delayed to the Fall.
Some believe that mid-June is a cycle turn so if we rally into it, a sharp decline could ensue, while it may be more likely that we could decline into it (after a brief bounce this week), setting up a Summer (technical rally) that could last for 1-2 months.
The Nasdaq monthly stochastic remained at 76% uncrossed and it is 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 (during summer rally) before falling sharply later this year. The weekly rose slightly to 16% but the "d" still has room to the downside in the weeks to come, daily is 24% crossed up and could experience a "stochastic drag" for many days or a few weeks.
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," as the 50 dma is threatening to cross over the 200 dma. The RSI rose to 43.
The MACD, ROC, OBV, and Williams%R improved to neutral while the important Money Flow and Acc/Dist worsened to negative, a bearish sign considering the index rose during the past week.
The Nasdaq is still 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 remained at 79% crossed up, weekly declined to 12% crossed down, daily declined to 16% uncrossed, hourly 37% crossed up. The NYSE McClellan Oscillator crossed up to +34, having gotten to that -80 area I wrote about last week, and the Summation Index reversed course back up at -710 but one should not forget that the largest point declines and percentage declines will be occurring if the market reverses back down.
The USD closed lower this week as its rally has stalled for the moment. Short term it may have a little more downside, then the real test will take place. Bond rates ended lower this week as the bears take a pause to refresh perhaps. Gold rallied modestly this week. Crude oil had reached a new high above 41 before dropping at the end of the week.
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.
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