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Nice week! Why? In the conclusion of my last "Dow Jones" post I stated "I think the market may continue to move down, at least to the point when I see the negative MVO is back to zero line and when the McClellan oscillator becomes red(negative) and starts to move up. The Nasdaq 100 is not as oversold as the DJI and this is one of the reasons why I think we may face further drop." This week I saw exactly what I expected to see, that's why I consider this week as a nice week - from the beginning of the week the Nasdaq 100 pushed the market down and it reversed exactly when MVO become zero and when the McClellan oscillator started to advance and crossed zero line around 14:00 on June 12, 2008.
When I look at the recent drop (since the middle of May) it reminds me the mini-version of the October 2007 - March 2008 stock market crash. You may see on the S&P 500 index:
One of the points that that could parallel the recent drop with October 2007 - March 2008 market crash is that both of this moves down I could split in 3 stages.
During October 2007 - March 2008 market crash:
- The S&P 500 and DJI indexes started to move down in the middle of October while the Nasdaq 100 index continued to move up until the beginning of the November. The Nasdaq was still bullish while the rest of the market was bearish.
- Then the whole market moved down by the middle of January. The whole market was bearish.
- After that the S&P 500 and DJI struggled to move up while the Nasdaq 100 continued to push the stock market down by the middle of March. The Nasdaq was still bearish while the rest of the market struggled with it.
The same in the recent move down:
- The S&P 500 and DJI indexes started to move down on May 19, 2008, yet, the Nasdaq 100 has recovered from the initial drop by making new highs on June 5, 2008. The Nasdaq was still bullish while the rest of the market was bearish.
- Then the whole market moved down. The whole market was bearish.
- The last week the Nasdaq 100 continued to push the stock market down while the S&P 500 and DJI were fighting against this move. The Nasdaq was still bearish while the rest of the market struggled with it.
Coming back to my charts and my technical analysis, by the end of this week I see more positive then negative factors:
- SBV moves up and for me this is a bullish sign;
- I see a lot of red MVO over the last to week which for me is a good fuel for the market up move;
- The VIX (volatility index) is moving down which would points to the bullish sentiment;
- The MACD, Stochastics, RSI and Advance decline oscillator are in the up direction - I consider it as a good sign;
- McClellan is above zero (green) - another point in favor of the bullish market.
Today I see oversold market and today I expect the further recovery. However, tomorrow the market could become heavily overbought - that's why I consider that the stock market should be monitored and analyzed constantly. It could be come overbought tomorrow or in a month... Plus, I could be wrong and if I do not monitor chart constantly I could find out about that when it's already too late...
