***** Technical Analysis (June 15)****
This is an updated TA update.
The market finally experienced a follow through rally day today, and it was extremely positive as the internals were much better than yesterday's all day long, signalling that it would last to the close.
The breadth was much better today, and the TRIN was just as good, indicating much better accumulation into more stocks today than yesterday. The improvement implies that a substantial uptrend is now likely, lasting more than a few days.
We will know later if this is a technical rally that fails or not, but for now it very much appears to be more than just a very ST bounce, especially for high relative strength sectors, such as refiners and other oil stocks, and high relative strength stocks in other sectors.
Triple witching tomorrow sometimes gets traders nervous, and it has a tendency, maybe 60%, to go in the opposite direction of the prior 4 day trend, as arbitrage and program trading positions get balanced/settled out.
The problem is that the first four days of this week were only slightly positive because there was weakness early in the week and there is no clear signal. This is so early in this rally that the market may not be ready for substantial profit-taking and a decline yet.
I see resistance at S&P 500 1290 and Nasdaq 2230, with a gap at 2270 that has a chance of filling.
Remember that we became extremely oversold and now many investors/institutions have lots of cash, and there are those who have to cover their shorts.
The weekly and monthly MACD's are clearly crossed down, indicating that the odds favor any rally failing in the next few weeks, unless the quality of this current rally signals otherwise.
For now the daily stochastics have crossed up strongly for all indices, and the MACD for the Nasdaq has turned positive while it is close to turning positive for the other indices. It is not common for the daily stochastics to suddenly turn back down/cross down after having crossed up strongly from 0%, so some continuation of rising prices seems likely in the days ahead.
The indices got parabolic from their EMA's, on almost all timeframes, so that too implied that a ST technical rally was due.
Watch the market internals and the quality of the rally in the next few days to determine if this rally will be a short-intermediate term (2 weeks to 2 months) rally or if it will fail in the next 1-2 weeks. Bear market rallies can be very sharp. If this is not a cyclical bear market, then the rally be much longer. If we fail to make series of higher highs and higher lows, the case for a cyclical bear will be strengthened.
stockcharts.com
(change this chart to $compx, weekly charts, and add TRIX to the slow stochastics and MACD) to get the best chart)
The Nas weekly Summation-related charts are below:
stockcharts.com[m,a]waclyyay[pc30!c20][vc60][iud20!ua12,26,9]
The Nasdaq McClellan Oscillator and Summation Indexes improved today, but could worsen after this rally fails:
stockcharts.com
One more rally day will make the McClellan Oscillators cross above the zero line and push the Summation Indexes upward.
For now, the best way to trade is to ignore longer range forecasts and to trade the swings based upon your technical analysis.
While there has been an extreme amount of damage done to the market technicals in the past 5 weeks, stocks may rally for a while now.
Odds still favor a lower trading range this year, if not an outright cyclical bear market. If one believes in Elliot Wave theory, it is probably hard to make a case that Wave 3 (down) has not started now, but perhaps it is possible that it will be delayed one more time. Otherwise, this rally is just a corrective move, failing in the not too distant future, to be followed by a lower low or a series of lower lows.
Because the technicals of the market are so damaged, it is probably not wise to assume that it was just a severe but normal correction within a cyclical bull market, but to remain flexible within a swing trading style.
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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