Current Rally Beginning to Show Signs of Exhaustion

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Technical Summary:

Short Term Trend: Neutral With a Bearish Configuration Possibly Developing.
Medium Term Trend: Bullish.
Long Term Trend: Neutral: Both the 100 DMA and the 200 DMA Are Flat.
Slow Stochastics: Overbought: Market Risk Is High.
Fast Stochastics: Neutral But Trending To Oversold.
VIX: Very Low: Market  Risk Is High.
McClennan Oscillator: Low But Trending Down. Not Ideal For Shorting The Market.
A/D Line: Bullish.

Technically Speaking:

The current rally which broke out on the 22nd of February is beginning to show signs of exhaustion. Of the major indices, the NASDAQ is the weakest. Price has already broken below the 200-day moving average (DMA) and a break below the 50 DMA could indicate that a short-term contraction is probably on the cards.

The VIX is very low and indicates that there is a very high degree of risk in the market, so I would not be chasing price action at the moment. I would wait for a break above the 18.58 level as this would show that the Volatility Index is moving outside its most recent trading range and that professional players are beginning to price in future market weakness.

Technically, to actively take advantage of developing price weakness I would like the NYSE McClellan Oscillator to be higher but you can’t get every index to be in your favor.

Chart: Dow Jones Industrial Average: Daily
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Chart: Dow Jones Transport Average: Daily
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Chart: S&P 500: Daily
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Chart: NASDAQ: Daily
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Chart: VIX: Daily
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Chart: NYSE McClennan Oscillator: Daily
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In the News: Intel Slashes Irish jobs

One of the greatest success stories of inward investment to Ireland has been the Intel Plant in County Kildare, located just outside the Dublin capital. Currently over 5,000 people are employed there. However, the recent announcement that Intel management was set to shave off 12,000 jobs worldwide has come as a shock to Intel staff, the Irish government and its jobs development arm: The IDA (The Industrial Development Authority).

Given that only two years ago Intel invested over 4 billion dollars in a new production facility at Kildare, it is not expected that too many position losses will be announced to Irish staff. However, people are now beginning to question whether top Intel management are really on top of their game. Is Intel having its “Marketing Myopia” moment? This phenomenon, first noted by famed Harvard Business Professor Theodore Levitt, describes how business leadership fails to notice fundamental shifts in market reality. Such failure usually leads to “top brass” losing control of their entire business model. Think Blackberry’s inability to fully understand the implications of the iPhone or Blockbuster’s denial of the media delivery paradigm shift that was Netflix.

I hope for the sake of many of my countrymen and women who work in Kildare that this myopia has not taken root in the Intel boardroom. I pray that they have a strategy to counter the new market force of mobile connectivity. If they have not, I fear the worst.

Chart: Intel Corp: Daily
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Charts Courtesy of StockCharts.com

© Christopher M. Quigley 3rd. May 2016.

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