Major indexes approaching statistical resistance

Market Snapshot for session ending 8-16-11:

Market Overview – What We Know:

• Tuesday’s marginal losses in major indexes underscored potential for “test” of last week’s index lows (1101.54—S&P 500).
• Net volume in market remains low relative to last week’s activity and was last at 35% (S&P Emini) to 50% (S&P Cash) of those higher daily volume totals.
• As Index prices have risen, net, over the past week, 10-Day Price Channels (see charts) have continued to drop to possible intersection points with prices.
• Momentum and Minor Cycle Trading Oscillators continue to move back toward neutral levels.
• Major resistance remains in place at Neckline of recently defined Head and Shoulders Top formations (1255.00-S&P 500).
• CPFL declined to a new low Tuesday, but the downward bias of the cumulative indicator is abating with Put Dollar Values only slightly higher than Call Dollar Values.
• MAAD was negative Tuesday, but the indicator remains above the short-term low it made last Wednesday.

Market Overview – What We Think:

• Short-covering/bargain-hunting appears to be losing upside steam in the face of impending juncture with declining 10-Day Price Channels and statistical resistance on diminishing volume.
• We suspect more strength from current levels that would require a breach of Price Channels is unlikely. A more likely scenario would call for a “test” of last week’s lows (1101.54—S&P 500).
• In a “test” of the recent lows, a possible downside target in the S&P 500 would be back toward the lower edge of the 10-Day Price Channel near 1150. That level would also comprise about a 50% correction of the gains since last week’s lows.
• The fact that Cumulative Volume in the S&P Emini is now below its March 2009 plot low is not a good sign for the broad market on the longer term.

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We are updating the daily chart of both the Call/Put Dollar Value Flow Line (CPFL) and Most Actives Advance/Decline Line (MAAD) indicators every day and providing the most recent raw data so you can begin to plot the indicators on your own (see below). The weekly equity index indicator summary provides longer-term commentary based on these indicators.

The definitions of the indicators along with links to the original stories provide helpful background. Also, Robert describes these indicators in a recent I-Trade show presentation available online.

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MAAD data for past 30 days*　　　　 　CPFL data for past 30 Days

*Note: Unchanged issues are not counted.

Robert McCurtain is a technical analyst, market timer and private investor based in New York City. If you would like to read more about how the CPFL is constructed, read a Futures article on the concept. This will take you to the MAAD article. Robert can be reached at traderbob@nyc.rr.com.