***** Technical Analysis (May 20)****
The market was mixed this week but the overall tone was firm and now it is overbought in the near term so expect a pullback early to mid-week.
The McClellan Oscillator for the Nasdaq is very overbought while the Summation is clearly on its way up from very oversold levels so while the near term should see some weakness, the short-intermediate term is likely to still be up.
It is also a positive sign that the Nasdaq has outperformed the S&P 500 and the Dow, indicating a rally with good breadth. Thus far, however, the rallies have not been on heavy trading though that could occur later.
The Nasdaq daily and weekly stochastics are crossed up and the weekly MACD is on the cusp of crossing up. If that occurs, then expect a multi-week rally.
The low that occurred last month may hold up for some time as it was made at very oversold levels technically and the rally from it has been orderly, not spike-like. This rally is climbing a wall of worry and may turn out to be a cyclical bull market rally if the volume can increase on rally days.
The USD has rallied for several weeks now and is getting overbought so its days may be numbered if the secular bear market is intact. It then would mean that this is a cyclical bull market rally within a secular bear and that a top is likely within the next few weeks with the futures contract, cash month, topping out at 86-87 or so.
If so, then energy and precious metals prices should firm up as they have been hit hard during the USD rally. Crude oil can still break below 46 support to the prior double bottom at 41, and spot gold can drop another 10-15 dollars.
But both are purportedly in a secular bull market and energy prices may resume its bull trend before precious metals due to the summer demand for gasoline and jet fuel, unless growth in China, India and the US takes a major turn for the worse.
Bond yields for the 10 year note have stayed in a range between 4.00 and 4.5% for the most part despite the steady increases in the Fed Funds rate, implying that inflationary fears are unwarranted and that the economy and wages will not expand much.
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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