S&P hits target as indicators correct oversold condition

Market Snapshot for session ending 8-31-11:

 

Last

Net Change

%Change

S&P 500 Index

1218.89

+5.97

+.49%

Dow Jones Industrials Average

11613.53

+53.57

+.46%

NASDAQ Composite Index

2579.46

+3.34

+.13%

Value Line Arithmetic Index

2674.13

+5.85

+.22%

Minor Cycle
(Short-term trend lasting days to a few weeks)
Positive

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

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

Market Overview – What We Know:

  • Intraday strength in S&P Wednesday caused bellwether to reach first upside target at 1228.02 if net strength over past several proves to be “C” leg of A-B-C rally.
  • S&P faded to close about mid-range once 1228.02 level was hit.
  • Short-term trend is positive with statistical Price Channel support at 1145.22.
  • Strength in S&P was not confirmed by Cumulative Volume which has yet to break above mid-August resistance.
  • Daily CPFL declined to another short-term low with net negativity for 20th session in row. Put Dollar Volume exceeded Call Dollar Volume by 2.57 to 1 as Put Dollar Volume increased and Call Dollar Volume dropped.
  • Daily MAAD data was net positive with 13 issues up and 6 down.
  • Short-term Momentum in S&P 500 remains moderately “Overbought” just above Neutral with “Overbought” condition evident in one Trading Oscillator and neutrality showing in the other.
  • Major resistance holds at Head and Shoulders Neckline (1255) in S&P 500.

Market Overview – What We Think:

  • Fade Wednesday in S&P 500 once first target at 1228.02 and possible top of “C” leg was hit could be suggestion market has re-entered zone of vulnerability.
  • Fact that short-term Momentum and proprietary Trading Oscillators have returned to neutral to moderately “Overbought” is indication market continues to unravel deeply “Oversold” conditions created during recent sharp decline.
  • But we continue to suspect any buying that develops will do so within context of still negative Intermediate Cycle and still challenged long-term uptrend.
  • Failure of Cumulative Volume in cash S&P and S&P Emini to better mid-August indicator resistance is an indication weaker hands have been fueling buying over past several days.
  • Price 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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