***** Technical Analysis (August 1)*****
Technically the market has weakened in the past month while the mutual funds have had net positive inflows and moneys may have transferred from bonds to stocks.
The bulls are proclaiming the inflows and transfer out of bonds to stocks and the fact that selling has not accelerated despite several chances to do so in the past month as reasons why this market's next major move will be up. They say that this correction is almost over, and that the current economic recovery is steady and will accelerate in the quarters to come.
The bears point to technical bearish divergences that should prove out to be more than just a resetting of the indicators before another move up. It is probably not a good sign that the S&P 500 has been relatively weak on the indicators because the large institutions are not accumulating those blue chip stocks of late. If the inflows should disappear, then the bearish case gets stronger. Fundamentally, the price/earnings ratios of stocks probably factors in most of the growth for this year, and the p/e of the S&P 500 is approaching 30 again, a dangerous level historically. Actually, 20 is dangerous historically.
The MACD and ROC remain negative and the McClellan Oscillators are -21/-55 for the Nasdaq/NYSE, respectively with its companion tool, the Summation Index, in deteriorating condition.
Sentiment indicators are bearish, especially Investors Intelligence and VIX/VXN RSIs and MACDs.
The rallies have been short-lived and on moderate to light volume, and if the next one or two are as well, then bulls may be in for a surprise in August to October.
Gold is correcting and may find support at 340 or 330, while bonds can't seem to find any support yet. When stocks fall sharply, bonds rise as a flight to safety usually occurs. The 10 year note was not attractive at 3.07% but at 4.4% and above, it begins to look better.
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.
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