The NASDAQ may be a bit overbought right now. Longer termed momentum signals on the weekly chart show a rounding over, and we’re seeing a bit of resistance at the top of the Bollinger bands. Mr. B’s famous bands are not squeezing right now, mind you, so its not likely a dire warning of a major bear movement. Lets call it more of a call for a healthy pullback. I might also note there that I pay more attention to momentum oscillators that use daily data, as I feel these tools serve best for shorter termed timing rather than big-picture calls. In the NAZ’s case, however, you can see that weekly stochastics and RSI can be reasonable indicators for turning points.
What’s got me wondering about the near termed action for the NAZ is the recent pullback on market darling AAPL. In September, AAPL was at around 19% weighting of the NAZ 100 index. Given the recent decline that weighting would be a bit lower now. Nevertheless, AAPL still holds significant influence on the NAZ. Take a look at the chart above. My trendline suggests that the stock went a wee bit parabolic earlier this year, and needs to either pullback or trade sideways for a while to allow the trendline to catch up with it. My guess is that AAPL might see near or below $600 before it resumes its merry way again. I’d rather see that happen sooner than later to ensure a healthy market. Seasonal influences should be kicking in for the tech sector very soon. And I’ve gotta admit – if the NAZ pulls back, and APPL with it – I’ll be entering my usual tech trades with as as much enthusiasm as always. But not until things settle down a little more.
SLX- on the NYSE is the steel index. It looks like it is poised to take off. Full STO coming off it’s low. MACD is about ready to cross.
Question. in this example how do we interpret RSI? At around 50 it is neither oversold or certainly not overbought. But the other 2 indicators suggest a bounce upwards.
Also when is the seasonal for steel do you know?
Daddyo–SLX, as you note, is neither oversold or overbought. Thats because its stuck in a trading range of about $41-46 (yes it briefly broke that in September but failed and crawled right back into its trading range). My thoughts: trade the range or buy on a genuine breakout. The momentum indicators are not going to help at this moment–just watch support/resistnance for your signals.
There looks to be a good support level for the S&P at 1420, good chance for a bounce there.
Keith, Last I heard Ron Meisels shares your feelings on S&P, he thinks the tsx, however, should reach 15000 because it has lagged + it tends to top later than s&p, your thoughts?
I repect Ron, and have had several conversations with him in the past. We often see eye to eye. Its a long subject to compare the 2 markets, but in a nutshell: commodites ( a big piece of the TSX) are fairly neutral to bearish in current technical profile-eg my recent comments on oil-and a long termed cycle (that I will do a chart for some day on this blog) came to a peak a year ago for the broad commodity basket. Also, while there certainly can and has been occassional divergence between the two indices, I note that there is also often influence by the US markets on our own. Thus, outperformance in a bear market (as I see coming in the next year or so) might mean losing less on the TSX, but still losing.
The TSX hit 14,200 one year ago, so getting there or slightly above may be possible before the kicking begins in the US markets later in 2013 – so Ron might be short-termed correct. I am not going to bet on positive market returns here or in the US after that.