***** Technical Analysis (August 22)****
This is an new TA update.
Tuesday saw a mixed market with slightly positive internals.
The NYSE and Nasdaq u/d vol figures were about 4/3, while the NYSE had slightly better breadth than the Nasdaq, which was also 4/3, on slightly higher volume than yesterday.
The technical indicators slightly improved today, such as McClellan Oscillators (+32/+30 for Nasdaq/NYSE), stochastics and MACD's.
Thus, the market remains in a rally mode which started last Tuesday in earnest, although the very ST indicators have turned negative, implying that we saw the beginning of a small retracement (decline) that will continue until sometime this week, then the market could turn back upwards, and the Dow can ultimately test the 11,722 area, the all-time highs, or at least the 11,600 level, while the SPX will be well short of its all-time high near 1550 of course, but could rally above 1300, and the Nasdaq might reach 2250.
Crude oil and gold were pretty much flat today.
It appears this rally has enough momentum to not see a sharp correction downward before rallying back up to new recovery highs but is unlikely to reach the May highs. The extremely strong bullish action on Tuesday and follow-through on Wednesday portends a rally for the next couple of weeks at a minimum.
Technology stocks have perked up and that has been needed for a bona fide rally to occur. If they do not come down much during this retracement decline over the next couple of days, then the overall market will likely continue this new rally trend.
The question is whether this uptrend is merely a trading trend for the shorter term or a new intermediate uptrend. Volume and late session activity will tell the story in the next couple of weeks, and the odds favor that it is not a new intermediate term trend thus far.
If breadth begins to deteriorate as the indices make higher highs in August and early September, then watch for a possible top and reversal.
But for now the path of least resistance is mostly up for the next couple of weeks, if the corrective move down early this week is brief and orderly, with support holding at SPX 1280, Nasdaq 2100 and Dow 11,200.
Below is a link to the DMI(ADX), slow stochastics and StochRSI:
stockcharts.com
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. |
