MARKET COMMENTARY

[Apologize for not making any update yesterday as there is personal matters to attend to which lasted till evening.]

Monday’s market lifted higher due to the plunge of the crude oil price and other commodities. However, it had given back most of the gain toward the closing, resulted in many charts displaying “shooting star” candlestick formation. This could signal the end of the current rally but confirmation was required.

Tuesday’s market made the dip almost confirming the end of the rally. However, the drop in the Dow and S&P are not significant and their volumes were low. This creates doubt if the markets are ready for a return to the bearish trend. With no strong bearish day and no spike in volumes, it is hard to tell if the market has actually completed its rally. The possibility of a bullish breakout remains strong.

Many people are looking to crude oil price for indication of the next market move. This is a valid lead so far and I believe it will continue so. This inverse relationship between the crude oil price and the major indexes may only break much later.

Chartwise, the Dow is actually showing a pretty bearish set of chart patterns and divergences: Bearish wedge, price and volume divergence, price and stochastic divergence, and the RSI remains in the bearish trend. The current market mood is rather bullish. The signals are conflicting. To end it, we need to see stronger action one way or other. So, let’s be patient and wait.

DJIA Daily Chart

Of all the major indexes, Russell is the only one that had the strongest rebound and turned bullish. Although there is an imminent pullback, it may eventually return to the bullish path. Meanwhile, we have seen a “bearish harami” candlestick pattern. Pullback can occur on Wednesday.

RUT Daily Chart

The Nasdaq was keeping pace with the Russell. It, too, had turned bullish with the breaking of the RSI 60% line. Yes, it is similarly at risk of a pullback, which is normal.

NDX Daily Chart

STOCKS TO WATCH:

NIL

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