Stocks makes small gains Tuesday on low volume

Market Snapshot for session ending 8-30-11:

Market Overview – What We Know:

• Major indexes advance again Tuesday, but early session gains fade by about 1/3 as profit-taking sets in.
• Trading volume picks up marginally
• S&P 500 remains above first resistance at 1208.47 and just shy of possible upside measured move target and “C” leg objective of A-B-C retracement move to 1228.02.
• Strength in S&P 500 above Price Channel and first resistance signals confirmation of reversal of short-term trend to positive.
• Yet again, strength in S&P was not confirmed by Cumulative Volume which has yet to break above mid-August resistance.
• Daily MAAD data was neutral with 9 NYSE issues positive and 9 negative. Two were unchanged.
• Daily CPFL continued its losing streak for the 19th session with Put Dollar Volume exceeding Call Dollar Volume by 1.40 to 1. New short-term low was created.
• Short-term Momentum in S&P 500 remains moderately “Overbought” just above Neutral with Neutral readings also evident in both of our proprietary Trading Oscillators.
• First significant resistance holds at Head and Shoulders Neckline (1255) in S&P 500.

Market Overview – What We Think:

• S&P 500 could be working on “C” leg of A-B-C countertrend retracement rally which could allow bellwether to work back toward Head and Shoulders Neckline resistance at 1255 if first objective to measured move at 1228.02 is exceeded.
• Fact that short-term Momentum and proprietary Trading Oscillators have returned to Neutral and better is indication market continues to unravel deeply “Oversold” conditions created during recent sharp decline.
• We continue to suspect any buying that develops will do so within context of still negative Intermediate Cycle and still challenged long-term uptrend.
• As expected, trading volume remains lackluster. This action is consistent with bear move retracement.
• So long as market sentiment as measured by such indicators as CPFL remains poor, we think any strength that develops could prove to be no more than weak bargain hunting/short-covering.

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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.

Click charts to enlarge

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.