Sunday, February 15, 2009

Technical Analysis

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My last week's worries about high volume surge during the market advance were not underestimated (see my last week "DJI Chart" report) - we had strong decline. In the same report I mentioned that the technical indicators were positive, yet, pointed to oversold indexes. We had only one day of flat market on Monday and on that day by the end of the session MACD, RSI, Stochastics, MVO and Advance/Decline Oscillators become negative on the DJI (Dow Jones Industrials). McClellan Oscillator was negative as well, yet still above zero line. Only SBV remained positive on that day, however even this indicator become strongly negative in the first hour of trading on Tuesday February 11, 2009.

So, were we now? By taking look at the same set of technical indicators I may say that now:
  • SBV is positive to neutral - it started to move up after being at low negative levels which is a positive sign, yet it became flat on Friday.
  • MVO - we had red MVO on February 10-11, 2009 and now MVO is equal zero which tell us that we had panic selling that could push indexes into oversold condition.
  • Advance/Decline Oscillator - still point on the negative sentiment - dominance of declining stocks. However, at the same time it shows that the indexes are oversold.
  • MACD is moving flat and could be considered neutral.
  • RSI is positive to neutral - it started to move up, yet it did not reach 70 line and become flat.
  •  Stochastics is negative - it dropped below 80 after being about that level.
  •  McClellan Oscillator is positive - it moves up and is very close to cross zero line.
As you may see the technical analysis results are a little bit mixed at this time. Some of the indicators are positive, some of them are negative and some are neutral. In summary I may assume based on my technical analysis that the sentiment is still undefined and we may see recovery as well as further decline, however, the indexes (DJI, S&P 500 and Nasdaq 100) are oversold in short-term (on 60-day chart where 1 bar = 1 hour) and because of that I would consider that the odds are on the recovery side.

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