Bear market retracement appears in the works

Since CV remains weak in both the S&P 500 index and the S&P Emini contract with the latter below its March 2009 lows by a wide margin, the odds are good that if it turns out recent strength has merely been a reflex rally in a bear move, CV will make new lows in both the Cash S&P and the S&P Emini.

In addition, our Call/Put Dollar Value Flow Line (CPFL) has confirmed NONE of the strength in the retracement short-term rally. NONE. In fact Daily CPFL data have remained net negative for the past 22 sessions while continuing to underscore the notion that options players haven’t believed in any of the strength of the recent rally. Last Friday Put Dollar Volume exceeded Call data by nearly 2.4 to 1. Last week Put Dollar Volume exceeded Call Dollar Volume by 5.2 to 1. Such negativity on the heels of a downside break in CPFL below its long-term uptrend stretching back to March 2009 is decidedly not a bullish sign.

Daily S&P 500 Index with Cumulative Volume

Weekly S&P 500 Index with Cumulative Volume

Then we have our Most Actives Advance/Decline Line (MAAD). MAAD which has also fractured its major uptrend line also stretching back to March 2009. But what is most worrisome about MAAD is the fact this bellwether "liked" little of the long-term move since March 2009. In fact, Smart Money has been skeptical to the extent MAAD was unable to recover even 50% of its losses following the October 2007 to March 2009 bear market. Put another way, if renewed selling develops MAAD could easily make new long-term lows while highlighting the fact Smart Money continues to exit this market.

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