***** Technical Analysis (June 20)****
This is an updated TA update.
Today Tuesday saw the markets mixed as the Dow closed up while the S&P500 was flat and the Nasdaq was down a few points. The support levels of 1220 and 2072 were not reached today and could be tested on Wednesday or Thursday. But strong internals tomorrow would imply that we will have a slightly higher low and then the rally would be substantial.
The a/d today was pretty flat while the u/d vol was positive but not impressive for either the NYSE or the Nasdaq, as neither finished at 3/2 or better.
The McClellan Oscillators changed by less than 5 today, implying a large move is coming within 4 days or less, and IBD also interpreted that a large move was imminent.
Severe selling pressure has not occurred in the past couple of sessions for the overall market, so it may be exhausted for now, but there has been a lack of buyers as well. Perhaps this is a dull market leading to a technical (summer) rally that can last a few weeks.
The hourly stochastics are once again getting oversold, and have another couple of hours of weakness before reaching 0% and thereby reaching a possible bottom. The daily stochastics are also very oversold.
The markets in general are extremely oversold and in order for a break below support to occur there will need to be enormous selling pressure. The market internals will signal whether the direction of the next major move. While there are some bullish divergences, it is unclear whether they are signalling a substantial rally(corrective, not impulsive) is imminent.
The sentiment is bearish now as Investors Intelligence has 38% bulls and 34% bears, so that is bullish from a contrarian view.
The ratio of price premiums in puts vs. calls reached .37 on June 12, which is a moderately bullish level, and is now .55.
Public/NYSE specialist short sales is at 5.62, a high level that is not bullish, but off of the high of 7.26 on May 19.
The daily stochastics and MACD are mixed with most of the indices' technicals becoming negative again after today's action.
See the chart link below and modify it:
stockcharts.com
(change this chart to $compx, weekly charts, and change the lower settings to slow stochastics, macd, and Williams%R 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 lowest chart, the weeklies, has finally reached -700 to -800, an area that frequently indicates at least a ST bottom.
The Nasdaq McClellan Oscillator and Summation Indexes worsened today:
stockcharts.com
The Summation Index has reached a very extreme intermediate oversold reading.
The indicators from IBD are little changed from last week, with sentiment negative and the NYSE specialists remaining more short than the public.
For now, the best way to trade is to ignore longer range forecasts and to trade the short term and short-intermediate term swings based upon your technical analysis.
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, and that will be signalled if we break above the resistance levels mentioned earlier, and if we then make a higher low.
Otherwise, we could see a rally that 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 in the quarters to come.
Fundamentally and from a macro-economic viewpoint, the technicals imply that China's growth may slow temporarily at least from an average of 9% to perhaps 7-8%, and India's growth may slow from an average of 7 1/2% to 6%, and the US economy may slow from an average of 3.5-4% the past year to 2.5-3% for the next few quarters.
Precious metals and basic metals, such as copper, may have reached their top when gold was over $700/oz and copper was about $4/lb, and will trade in a lower range for a while. Zinc and other minerals will also trade in a lower range than their lofty ones this year. But the stocks that are in these sectors can still make good money, and their stock prices may recover some in the weeks to come.
Oil stocks fell sharply today despite crude oil remaining relatively lofty in price. Oil stocks never became as parabolic as some other resource stocks had, so they may seek support soon and may recover more in any rallies than metals and mining stocks.
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, and be aware that we could be in the early stages of a cyclical bear market.
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.
Dr.Bob no longer hosts Stocktimers meetings on Sunday nights at AOL. |
