Stocks rally off lows of day, Commodities lower

qqqq0304.pngThe Dow and S&P closed a bit lower than yesterday, but generally rallied well from the lows of the session. The Nasdaq actually closed with a slight gain. The trend of the Nasdaq, as you can see on the chart of the QQQQ to the left, has had a sharp downtrend, but has failed to rally much off the lows from January. The Dow and S&P are still well off the January lows. There is a chart a couple of posts back. The Nasdaq has been basically trending sideways right along those lows. I drew a blue line from the body of the Jan 23rd candle, where there was a rejection spike with a subsequent rally. That area has been test a couple of times and was again rejected today, at least so far. The turn-around again from that area is somewhat encouraging. The momentum indicator is getting oversold. The bands this time are the Keltner channel, with a 20 period ema. Prices were turned back by that moving average on every rally attempt. The Jan 23rd bar fell through the channel, the Feb 7th bar came close to the lower band, and the low today was even higher from the band on a relative basis. I’m looking for the possibility of a rally if momentum turns back up, with an objective of the upper band. It is important to still view the trend as down. Also, there is a lot of overhead resistance to get through, so there’s lots of chances for this rally to fail along the way and resume the main trend. There’s still a good chance that momentum will stay down, even if oversold, and the lows will be taken out, which will negate the above scenario. So far I’m just looking at the possibility of a bounce in here, and momentum turning up would be a first clue, and that hasn’t happened yet. Sentiment is getting very negative. A bounce in here would be just the thing to confuse the masses. The S&P chart looks less clear to me, although an upturn there would start from a higher relative area, so that might lead a rally ahead of the Nasdaq.
oil0304.pngCommodities were sharply lower today. I mentioned the parabolic uptrend in soybeans yesterday, and today they were down nearly fifty cents, which is huge for bean, however when beans are in the teens it isn’t as large a percentage drop. Trends in the grains are higher but bearish divergences are starting to show up. Gold finally had a down day. I know the gold bulls thought there would never again be a down day. Oil also had a big down day. The chart here is the USO Oil etf. I again have the Keltner channel on this chart. You can see how well it contains the swings. I use the same parameters on all charts, even intra-day charts. You can clearly see the bullish divergence in the middle of the chart, where the swing on the right side failed to touch the lower band. That kicked off the last rally up. There is a loss of momentum on the last part of this rally, as prices hugged the upper band. This isn’t a clear divergence as there are not well defined swings. Momentum, as defined by the double stochastic, is getting oversold. With such a steep uptrend I would guess that the mid-point of the channel could hold and if momentum turned back up there could be another attempt at a rally back to the upper band. However, that could set up a nice bearish divergence. If the mid-point line doesn’t hold, I would then wait for the channel to start trending down, and would then short rallies back up to that declining mid-point, using the double stochastic as the trigger.