From a technical point of view, this article is about the stock market.
Yesterday, the tech-heavy NASDAQ was the only market that didn't drop. It went up 3.04 points to stay above 2300, which is its five-year high. As I've already said, the NASDAQ's breadth has gotten better.
The DOW lost 65 points, or 0.58 percent, and fell to 11,150.70, which is just below its important short-term 20-day moving average, which is a warning. The S&P 500 index fell by 2.64 points. These two indices have the weakest near-term technical signals out of the four indices.
After hitting a new all-time high on Wednesday, small-cap stocks are still going strong. The Russell 2000 dropped 1.58 points, or 0.21 percent, which is a good sign because the market was very overbought. The small-cap performance indicator is up by a healthy 13.28% this year. Even though it's impressive, I'm not sure if the index can keep going up at this rate.
On Thursday, the May light crude futures on the New York Mercantile Exchange (NYMEX) went above $67 a barrel. The short-term signals are mostly bullish, and the trend is going up. After a rectangle formed, the break out happened between $61 and $65.50. If oil stays between $65.50 and $66, it could reach $70, which it last did in February. But keep an eye out for selling pressure because the contract has been bought too much. Stocks will be hurt by the price of oil.
Over 2 billion shares have been traded on the NASDAQ for the last three straight sessions. Yesterday, about 2.22 billion shares changed hands on the NASDAQ, which is more than its 5-day and 10-day moving averages of 2.11 billion and 2.18 billion shares, respectively. After a strong volume breakout on Wednesday, yesterday's small gain on high volume is a good sign.
Yesterday, business picked up on the NYSE. On Thursday, 1.61 billion shares were traded, which is more than the 5-day and 10-day moving averages of 1.55 billion and 1.55 billion, respectively.
The near-term technical picture for the NASDAQ is bullish, but there are signs that the market could be getting weaker. The Relative Strength is still pretty high, which suggests more gains if it can stay that way. The index is still above its previous pivot point of 2332.95 and its five-year high of 2333, which is a sign that the market is getting stronger. The index is trading above its 20-day moving average of 2297 and its 50-day moving average of 22854.
The MACD keeps showing a mild buy signal. The MACD trend is down, but it has changed direction. After trading mostly sideways for a while, the break to the upside was bullish. Now we'll see if the NASDAQ can keep going up and reach 2366 or 2387. The index is now just a little bit too high, so keep an eye out for possible selling pressure.
On the blue chip side, the short-term signs for the DOW got worse and are now moderately bearish. The intermediate trend is up, but yesterday's break below its 20-day moving average of 11,156 is a warning and could mean more bad news if it doesn't hold. The Relative Strength also dropped below neutral, which could mean that the market is losing speed. Yesterday, the MACD turned negative and is now showing a moderate sell.
The most important thing about the DOW is whether or not it can stay around its 20-day moving average. Signs point to more weakness, but the selling has made the market almost oversold. If it doesn't hold, the DOW could fall to 11,092, 11,077, or its 50-day moving average, which is 11,016. If the market goes up again, the DOW could move back above its 20-day moving average, which is 11,234.
The DOW's Bollinger Bands are moving up and getting wider, which points to more volatility in the near future. Look at this.
The near-term outlook for the S&P 500 is neutral to slightly bullish. Yesterday, the Relative Strength went down, and it is now just a little bit above neutral. The index is trading above its 20-day moving average of 1,294 and its 50-day moving average of 1,283. The MACD shows nothing.
The goals for the short term are 1,310 and 1,333. If the index doesn't stay above its 20-day moving average, we could see it fall.
The Russell 2000 is bullish for small-cap stocks. The Relative Strength is pretty strong, but keep an eye on it to see if it can last. The recent break above the last pivot point, which was 745.18, was a good sign. Highs are getting higher and lows are getting lower, which is a good sign.
Watch to see if the Russell 2000 can go up, but with all the buying going on, the index is very overbought. The MACD is positive, and the downtrend seems to have stopped.
The next place where the Russell 2000 will run into trouble is between 772 and 803.
Yesterday, the advance-decline line on the NYSE, which is 0.77:1, was below 1.0. This means that the market is still a mixed bag. The NASDAQ was able to stay at 1.004:1, which is above 1.0. In seven of the last ten sessions, the daily A/D reading on the NASDAQ was above 1.0. Both the NYSE (1.27:1) and the NASDAQ (1.42:1) have 5-day moving averages that are still above 1.0.
The market continues to show signs of being bullish. For the 14th day in a row, the NASDAQ's new high-to-low ratio (NHNL) was above the bullish 70 percent level, coming in at 89.35 percent. For the last 15 sessions in a row, the NHNL ratio on the NYSE (82.69 percent) has been above 70 percent.
The current technical situation for the four most important indexes looks like this:
NASDAQ: Bullish; Relative Strength: Above Neutral; Slightly Overbought
DOW: Moderately Bearish; Relative Strength: Below Neutral; Nearly Oversold
Neutral to moderately bullish for the S&P 500; neutral for relative strength.
Bullish; Relative Strength: Relatively Strong; Extremely Overbought.
Here are some things to look out for on Friday.
The DOW is the weakest of the four indices, so there is more pressure to sell it. Its near-term technical picture is moderately bearish, making it the most likely to go down. The index is close to being oversold, so keep an eye out for possible support.
Tech stocks and small-cap stocks still have the best technical strength, but keep an eye on the Russell 2000, which is very overbought, and the NASDAQ, which is only slightly oversold.
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