***** Technical Analysis (May 27)****
The markets are now very overbought for the short term and due for a pullback of greater magnitude than last week unless rally days occur on heavier volume. The light volume for stocks has not confirmed this rally to be a strong one yet but heavier volume could occur during the next leg up.
The technicals and charts for the indices are quite positive for the short-intermediate term of 2 weeks to 2 months, albeit a near term correction. The momentum indicators are strong enough to warrant further advances after a couple or few weeks of weakness.
The McClellan Oscillator for the Nasdaq has been stronger than on the NYSE, a positive development of the past several weeks, implying this rally is broad-based and could last some time. The 10% index has not yet gotten to an extreme reading during the rally.
The stochastics and MACD are positive on the weeklies but the dailies could reset this week by a market decline.
The USD has been quite strong and has reached the first target intraday of 87+, and now appears it could overreach by testing the 89-90 level in the weeks to come, especially in light of the EU failure in France.
Crude oil has rallied close to 52 after having fallen to just above 46 support but oil stocks have rallied on light volume so they have not shown conviction so far to the upside but the worse may be over even if a pullback occurs soon.
The driving season is nearly upon us and the fact that no new refineries have been built for over 25 years in the US, bodes well for spot crude prices rising this summer. The US (3 1/2% GDP growth), Chinese (9% GDP growth) and Indian (5% GDP growth) economies are strong and higher gasoline/jet fuel prices have not deterred summer travel plans in the US.
Precious metals stocks have started to act a little better but the strength of the USD could hurt gold more than oil stocks. If the USD reverses back down or stops going up, that will help oil and gold.
The bond market remains in a range with the 10 year yield between 4.0% and 4.5%.
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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