***** Technical Analysis (July 21))****
This is an new TA update.
Today Friday saw a weak market with the major indices all down and the internals negative, qualifying as another distribution day due to the heavier volume.
The NYSE a/d was 1/2 while the u/d vol was worse at 2/7, on very heavy volume of 2.7B shares.
The Nasdaq a/d was 1/3 while the u/d vol was 6/17 so its TRIN was just below 1.00, and volume was heavy at 2.4B shares. The Nasdaq remains relatively weak compared to the NYSE Composite.
The Nasdaq McClellan Oscillator worsened at -37 while the NYSE Oscillator also worsened to turn negative at -14. The daily stochastics are going back down and the MACD remains crossed down, and are very oversold once again.
Perhaps the distribution was skewed somewhat because it was options expiration Friday, but the trend remains down until proven otherwise.
Oil and precious metals stocks were under pressure today as they are having a hard time providing leadership.
But because the market is so extremely oversold, we could see a technical rally, albeit choppy, in the next 2-4 weeks.
Possible scenarios are that that market either sells off more to get us to a tradeable bottom in the next week or so, or we get another bounce that delays it.
Be sure to use the advantages of the "top-down" approach, a paradigm in technical trading. The bottoms-up approach refers to the idea that market timing is not used and that the goal is to select strong companies from a fundamental standpoint to buy and hold.
The "top-down" approach refers the the idea that one first ascertains the trend of the market, the strongest or weakest sectors for that trend, and the strongest or weakest stocks within those sectors, to trade, all with the trend. For example, recently the oil sector has been among the strongest while the semiconductors have been among the weakest. So when you see the market trending up, you would select the strongest oil stocks to go long, and when the trend is down, you would short the weakest semiconductors.
For breadth momentum charts, 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 Nasdaq McClellan Oscillator and Summation Indexes are linked below:
stockcharts.com
The indicators from IBD are little changed from last week, with sentiment negative and the NYSE specialists remaining more short than the public. Investors Intelligence shows that there are a few more bullish advisors now than bearish ones, but usually bottoms coincide with more bears than bulls.
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.
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.
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.
Thus, the expectation is that the overall market trend will be sideways to down now, but choppy, and like much of 2004 and 2006, the energy sector will outperform most others, especially oil E&P's, refiners, drillers, and oil equipment/services companies, as we are now in favorable seasonality for gasoline and crude prices.
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.
I can be reached at drbob512@msn.com. |
