***** Technical Analysis (August 9)****
This is an new TA update.
Wednesday saw a huge rally in the morning, with very low trading index readings, which usually indices strong accumulation, but then was followed by a later selloff that qualified as a very bearish intraday reversal.
The NYSE a/d finished at 13/18 and the u/d vol was 9/16, on heavy volume of 2.6B shares. The breadth and u/d vol figures were almost exactly the same as on Tuesday.
The Nasdaq a/d ended at 11/18 while the u/d vol was 3/2, as it was skewed by CSCO's huge up volume and other techs, on volume of 2.1B shares.
The Nasdaq McClellan Oscillator was a little more negative at -13, while the NYSE Oscillator declined to +1 from +45 three sessions ago as it is now in jeopardy of turning negative as well.
The majority of daily stochastics are crossed down, bearish, while their daily MACD's are still crossed up and positive but their 60 minute MACD's are now bearish. The Nasdaq and Russell 2K have stochastics that are not crossed down yet because they never got very high and have had relative strength the last couple of days. Most indices are below their 10 day moving averages, so that should be watched closely.
Below is a link to the DMI(ADX), slow stochastics and StochRSI:
stockcharts.com
They are all pointing to lower prices trend. For the ADX dark line, you will notice that while the market has been rising the past 3.5 weeks, the line has not been rising, thus indicating the rally has been a countertrend, not a major move.
While the market is oversold in the intermediate term, the ST is not, and August usually sees light volume on Wall Street, causing a greater likelihood of fewer bids and a greater effect of selling and short-selling on prices.
The Dow resistance is at 11,368 (S&P500 at 1293/Nasdaq at 2119) and soon a rally needs to take those out or risk a bearish reversal that will be an intermediate term one.
Support to watch for are 11,085, 1258, 2055 for the Dow/Spx/Nasdaq, respectively, and a close below those could usher in a decline to test the recent lows, and ultimately a breakdown.
Today the Dow closed just below that support while the S&P500 and Nasdaq Composite are just a few points above theirs.
The odds favor a technical breakdown in the days to come, with a test of the recent lows coming after that rather quickly. If so, those lows may not hold.
See the indicators below:
stockcharts.com[m,a]waclyyay[pc30!c20][vc60][iud20!ua12,26,9]
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
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. It started in early May.
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 2-3% for the next quarter, and may become a recession within the next 6-9 months.
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. |
