Low volume, lack of upside steam plaguing market

Market Snapshot for session ending 8-17-11:

Market Overview – What We Know:

• Major indexes were mixed Wednesday with the “Blues,” S&P and Dow 30, slightly more positive than the more speculative NASDAQ and Value Line.
• Net market volume remains low relative to last week’s activity.
• CPFL declined to yet another short-term low Wednesday with the indicator holding net negative for the past ten sessions to underscore a lack of enthusiasm for this market by options players.
• MAAD remains anemic while the Daily MAAD Ratio has moved back to neutral from deeply “Oversold” levels.
• Index prices have moved into the vicinity of declining 10-Day Price Channels (1211.17—S&P 500) and are poised to intersect those lines if more strength develops. The key were here is “IF.”
• 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).

Market Overview – What We Think:

• Fact that market is hesitating and churning a bit in the face of statistical resistance as measured by 10-Day Price Channels could be an indication index prices are about to “test” last week’s lows (1101.54—S&P 500).
• Even if prices break above Price Channels, the odds are very good that recent Head and Shoulders “Neckline” resistance points (1255—S&P 500) will act to contain any strength.
• Until we are presented with new evidence, we suspect that any strength which develops on the near-term will prove to be no more than a reflex rally within the context of a larger Intermediate Cycle negative.
• 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 pointl would also be equal to 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 bad sign for the broad market on the longer term.

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We are also 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.