***** Technical Analysis (May 23)*****
The sentiment is too bullish as indicated by the Investors Intelligence survey which shows 56% bullish advisors, the highest level since February, 2001, and the bearish advisors number only 20.9%, the lowest level in three years! The sentiment from the AAII survey is also too bullish. It should be remembered that sentiment indicators are not usually excellent timing tools but can be fairly good as leading indicators of a market move by about 2-4 weeks.
The put/call ratio dropped to .74 after having been high for several days though its 50 dma and MACD are giving neutral readings. The VIX and VXN MACDs are slightly crossed up and their RSIs are rising ever so slightly, so for the time being, they are giving a slightly negative reading.
The inability of the market indices to follow-through on the downside after last Monday's substantial decline implies that there will be another rally this coming week, perhaps early to mid-week. The Dow has some resistance at 8800 and the Nasdaq at 1553. If the indices do not break out above those on a closing basis and on good volume, it would be a negative development because many of the technical indicators have been weakening for the past few weeks.
For Friday, the Nasdaq TRIN closed at a positive .74, with a/d of 18/13, up/down volume 9/5, on pre-holiday light volume of 1.45B shares. The MACD remains negative as does the ROC. The Williams%R, CCI and OBV remain neutral while the DMI, Money Flow, Acc/Dist and Aroon remain positive, and the RSI rose to 57.
The Nasdaq McClellan Oscillator rose to +1 from -4, turning the Summation Index back up, and now we shall see if the recent weakness was just a reset before another major runup, or if it was evidence of a topping formation and reversal in process. The weekly stochastic is still crossed up while the daily is crossed down.
The NYSE TRIN closed a neutral 1.08, with a/d of 2/1, up/down volume 15/8, on light volume of 1.2B shares. The McClellan Oscillator rose to +14 from +5, so perhaps here we go again on the upside.
The global markets have also been firmer of late, including the Nikkei which has risen to above 8100 and the Hang Seng which is over 9400, but if the 8000 and 9000 levels do not hold, it could portend another downdraft over there.
The US dollar seems overdue for a technical bounce or rally after having fallen sharply in the past month or two, but the long term trend appears down.
Gold has been firm lately and may have a higher trading range for the next several weeks, with the low range being near $340-350 and the high range being $380-$389. It is atypical when both the stock market and gold rise in tandem but as is the case now, it does occur occasionally.
Bonds have also rallied recently and are near their highs once again. They may be due for a breather as well.
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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