An inauspicious start on Friday did not accelerate into a route as the market indices were down modestly in profit-taking rather than serious distribution.
The Nasdaq TRIN closed at a neutral .95, with a/d of 2/3, up/down volume of 7/9, on moderate volume of 1.8B shares. The CCI worsened a bit to barely neutral and very near positive while the others remained positive except the ROC which remains negative and the OBV which remained neutral. The RSI dropped to 65 from 70.
The Nasdaq McClellan Oscillator dropped to +10 from +26 as it takes strong breadth momentum to keep it up above +30. It has come down on several occasions during the last couple of months, only to run back up, and it could do that again, but unless we are in a new secular bull market, it cannot keep doing it.
The NYSE TRIN closed at a mildly positive .87, with a/d of 17/16, up/down volume of 8/7, on moderately light volume of 1.5B shares. The McClellan Oscillator dropped to +15 from +24.
The Nasdaq monthly stochastic is 43% crossed up, weekly is 95% crossed up, daily is 90% crossed down, and hourly is 45% crossed down, so more weakness in the short term is likely.
The Dow monthly stochastic is 42% crossed up, weekly 86% crossed up, daily 87% sideways, and hourly 55% crossed down.
The sentiment indicators are mostly negative with the VIX and VXN MACDs crossed up and the put/call ratio MACD turning negative once again. The advisors are much too bullish.
On the daily charts, it appears that we could get a retest of the Dow 9043-9077 area and the S&P 500 968 level even if we get a short term decline, as prior resistance levels have been broken at 8522.
The Dow and Nasdaq reached new recovery closing highs on Thursday while the McClellan Oscillators didn't reach their last three prior highs, which is bearish divergence, along with bearish divergences in the ROC and CCI.
If selling pressure cannot accelerate early this coming week, then we should see those resistance levels being reached by a rally, but if bearish divergences multiply, then that could be the top. A heavy volume rally for 3 or more days in a row would invalidate that idea and extend this rally for several more weeks. But there is not yet enough evidence to believe that the secular bear market is over despite what the media analysts say.
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