Stock indexes likely on verge of short-term rebound

Market Snapshot for session ending 8-23-11:

 

Last

Net Change

%Change

S&P 500

1162.35

+38.53

+3.43%

Dow Jones Industrials

11176.76

+322.10

+2.97%

NASDAQ Composite

2446.06

+100.68

+4.29%

Value Line Arithmetic

2512.28

+103.04

+4.28%

Minor Cycle
(Short-term trend lasting days to a few weeks)
Negative / Neutral

Intermediate Cycle
(Medium trend lasting weeks to several months)
Negative

Major Cycle
(Long-term trend lasting several months to years)
Neutral / Negative

Market Overview – What We Know:

  • Odds are increasing short-term bottom (1101.54—S&P) has been put in place after index prices reversed upward from recent lows after failing to sink below those levels.
  • Short-term reversal to positive would come with strength in S&P 500 above upper edge of 10-Day Price Channel at 1197.13 Wednesday with strength in S&P Emini required above 1195.84.
  • Cumulative Volume (CV) continues to hold above August 8 interim low in both S&P 500 Cash Index and S&P 500 Emini contract, but Emini CV remains somewhat weaker.
  • Call/Put Dollar Value Flow Line (CPFL) faded to another short-term low Tuesday and for 14th day in a row, despite strong price gains in major indexes Tuesday. Put Dollar Volume was negative Tuesday by 1.19 as compared to Monday’s negative number of 1.29 to 1.
  • Most Actives Advance/Decline Line (MAAD) was net positive Tuesday with 19 gainers and 1 loser.

Market Overview – What We Think:

  • With likelihood increasing Minor Cycle low has been made, possible short-term improvement suggests two possible upside targets. A 40% retracement would put S&P 500 back to 1204 with a 60% retracement calling for a move toward 1255, level exactly coincident with Head and Shoulders “Neckline” Resistance we suspect will contain gains for some time to come.
  • Odds for market weakness to new lows within next couple of weeks are rapidly diminishing and strength or consolidation with a net higher bias is likely over at least the next several sessions.
  • So long as CPFL and MAAD remain on-balance weak, we believe any market gains should be viewed with suspicion and as developing within context of larger cycle negativity.
  • Also, fact that Cumulative Volume in S&P Emini is now below its March 2009 plot low is bad sign for broad market on longer term.

Click charts to enlarge

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.

Click charts to enlarge

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

Date

NYSE Adv

NYSE Dec

Date

OEX Call $Volume

OEX Put $Volume

7-13-11

14

6

7-13-11

25452

90215

7-14-11

3

17

7-14-11

57503

73908

7-15-11

8

10

7-15-11

122830

41278

7-18-11

0

19

7-18-11

32600

70051

7-19-11

18

2

7-19-11

81963

36469

7-20-11

12

8

7-20-11

48958

36029

7-21-11

14

6

7-21-11

81985

37458

7-22-11

6

14

7-22-11

26566

23969

7-25-11

5

15

7-25-11

60431

29726

7-26-11

13

7

7-26-11

12740

29994

7-27-11

3

17

7-27-11

25922

98893

7-28-11

5

14

7-28-11

31161

42272

7-29-11

5

14

7-29-11

39764

73156

8-1-11

8

12

8-1-11

67404

100232

8-2-11

0

20

8-2-11

44027

98237

8-3-11

17

4

8-3-11

112076

111221

8-4-11

0

20

8-4-11

104998

400116

8-5-11

8

12

8-5-11

72140

258219

8-8-11

0

20

8-8-11

71137

673757

8-9-11

19

1

8-9-11

78912

329885

8-10-11

0

20

8-10-11

64575

242026

8-11-11

19

1

8-11-11

99447

182240

8-12-11

12

8

8-12-11

38879

74166

8-15-11

20

0

8-15-11

47561

81328

8-16-11

5

15

8-16-11

45058

46229

8-17-11

12

8

8-17-11

43194

65757

8-18-11

1

19

8-18-11

57314

307820

8-19-11

2

18

8-19-11

83277

180689

8-22-11

11

9

8-22-11

75476

97419

8-23-11

19

1

8-23-11

47698

53693

*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.

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