Time running out on market's reflex rally off August lows

Market Snapshot for session ending 9-8-11:

 

Last

Net Change

%Change

S&P 500 Index

1185.9

-12.72

-1.06%

Dow Jones Industrials Average

11295.81

-119.05

-1.04%

NASDAQ Composite Index

2529.14

-19.79

-.78%

Value Line Arithmetic Index

2567.56

-44.70

-1.71%

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

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:

  • After hitting upper edge of 10-day Price Channel at statistical resistance (1197.46) S&P 500 faded Thursday while also falling away from August 31 intraday and first resistance high (1230.71).
  • While the short-term rebound that began after August 9 lows (1101.54—S&P) remains in effect, time is running out on this reflex rally.
  • Total volume on NYSE rose about 2% Thursday vs. Wednesday’s activity.
  • Market continues to trace out what could be classic bear “flag” on short-term cycle within context of negative Intermediate Cycle.
  • Resolution of pattern would come with downside break below trendline to August lows and lower edge of 10-Day Price Channel. Selling to new lows needed to re-assert larger cycle negative.
  • Cumulative Volume plot high that failed to confirm strength into August 31 short-term high (1230.71—S&P) continues to hold below that late August level.
  • For 25th day in a row, Daily CPFL declined to new short-term low Thursday with Put Dollar Volume exceeding Call Dollar Volume by 2.38 to 1.
  • Daily MAAD data was net negative by 3 to 17.

Market Overview – What We Think:

  • We continue to think time is running out on Minor Cycle rebound rally began after early August lows, but there must be a definitive downside break of rising trendline stretching back to August lows with coincident weakness below 10-day Price Channel to end rebound.
  • It’s still possible rebound could carry the S&P to “Neckline” resistance (1255) of recently violated Head and Shoulders Top, but increasing downside volume on market weakness has been yet another indication that market internals remain poor and a sign there is little chance major resistance at1255 level in S&P 500 will be overcome.
  • Ongoing failure of CPFL to show any enthusiasm for market on upside despite recent price gains is not a good sign.
  • 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 S&P 500 and S&P Emini to better mid-August indicator resistance is an indication weaker hands have been fueling buying.
  • Price action and volume are consistent with bear move retracement.

Click charts to enlarge

Next page: Indicator review

Page 1 of 3 >>
Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome