***** Technical Analysis (May 27)*****
The question at this point is whether the stock market is entering a new secular bull market or if it is enjoying a cyclical and quick bull market within a secular bear market which has much more on the downside in the next 1-2 years at a minimum.
There are negative readings or bearish divergences in the MACD, rate of change, and now the OBV, while there are some technical indicators making lower highs, such as the McClellan Oscillator, CCI and Money Flow.
Some of the sentiment indications are quite negative now, such as the Investors Intelligence and AAII while some are mildly negative, such as the VIX MACD.
Chartwise, the Dow and other major indices made new recent highs today, breaking out above 8743, SPX of 948 and Nasdaq 1553, by a few points, and now the 9077 and 965 levels are the next possible targets, barring a reversal that has conviction. The Nasdaq may reach the 1600-1650 level where it should meet some major resistance.
The action today was pretty impressive, with the Nasdaq TRIN an extremely positive .28, indicating very strong accumulation, on moderately heavy volume of 1.9B shares. The MACD improved but is slightly negative while the OBV joined the ROC in being negative. The RSI rose to 65.7 and another day or two of strength should get it extreme to 70 or just above. The other major indicators are positive now.
The Nasdaq McClellan Oscillator rose to +21 from +1 but it is lower than during the last couple of rallies and the 10% index is getting extreme again. The weekly stochastic is extremely high at 99% as is the daily at 98%.
The NYSE TRIN closed at a very positive .45 on moderate volume of 1.5B shares as the most action was on the Nasdaq. The McClellan Oscillator rose to +26 from +14.
The market has been quite resilient after dips or pullbacks that have been ephemeral but unless we are in a new secular bull market, there is likely to be at least a major correction to this 3 month rally (or 8 month rally from the October lows).
If this is still a bear market, then we should retest the October lows in the next year, but if we are in a trading range neutral market, then we could spend a lot of time in the Dow 8,000 to 9100 range so that earnings might start to catch up to prices, which still indicate that companies are still overvalued, on a GAAP basis, not proforma.
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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