S&P remains weak in face of first minor resistance

Market Snapshot for session ending 9-1-11:

 

Last

Net Change

%Change

S&P 500 Index

1204.42

-14.47

-1.19%

Dow Jones Industrials Average

11493.57

-119.96

-1.03%

NASDAQ Composite Index

2546.04

-33.42

-1.30%

Value Line Arithmetic Index

2621.96

-52.16

-1.95%

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:

  • Finding short-term resistance at first upside target (1228.02) and possible top of “C” leg of possible A-B-C retracement, S&P 500 stalled Thursday and posted net loss as sellers stepped in.
  • Trading volume diminished about 13% on the Big Board.
  • Short-term trend remains positive with statistical Price Channel support last plotted at 1142.24. Statistical Channel support numbers will rise over the next several days.
  • Strength in S&P Cash and S&P Emini was not confirmed by Cumulative Volume which has yet to break above mid-August resistance points.
  • Daily CPFL declined to new short-term low Thursday with negative readings holding for 21 days in a row. Put Dollar Volume exceeded Call Dollar Volume by 3.7 to 1.
  • Daily MAAD data was net negative by 4 to 16.
  • 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:

  • While we could still allow for strength to “Neckline” resistance (1255) in S&P 500 of recently violated Head and Shoulders Top, fact that market has faded over past two sessions in face of first resistance (1228.02) could be sign our A-B-C countertrend scenario will develop.
  • Since there is still time required for the reflex rally to run out of steam, it is premature to suggest an end to the short-term upmove that began after August 9 lows.
  • Fact that short-term Momentum and proprietary Trading Oscillators have returned to neutral to moderately “Overbought” is indication market continues to eliminate statistically “Oversold” conditions created during recent sharp decline and is, in fact, now moving in opposite direction statistically.
  • 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 and volume are 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 will prove to be no more than weak bargain hunting/short-covering.

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