S&P hits, fractures short-term trendline, rebounds

Market Snapshot for session ending 9-12-11:

Market Overview – What We Know:

• Following marginal penetration of short-term uptrend line near 1143--S&P 500 under development since early August lows, bellwether issue rebounded Monday.
• Trading volume in S&P deteriorated about 10% on positive move relative to Friday’s decline on increasing volume.
• Cumulative Volume remains weak to extent CV indicator has yet to overcome statistical resistance put in place August 31. S&P prices have rallied above similar price resistance (1208.47).
• Price action since August lows continues to look like bear trend rally with suggestion that time is running out on short-term rebound.
• Market continues to trace out what could be classic bear “flag” on short-term cycle within context of still negative Intermediate Cycle.
• Resolution of pattern would come with downside break below trendline stretching back to August lows with break below actual low (1101.54--S&P).
• For 27th day in a row, Daily CPFL declined to new short-term low Monday with Put Dollar Volume exceeding Call Dollar Volume by 1.38 to 1.
• Daily MAAD was up a touch by 11 issues to 9. New indicator lows could nonetheless follow with ease

Market Overview – What We Think:

• Short-term trend could get a bit dicey in the sessions just ahead if no decisive downside break develops. Most Short-term indicators remain near neutral and we cannot preclude possibility market is completing “B” leg of A-B-C countertrend rally.
• Break back above upper portion of 10-Day Price Channel near 1204 could result in challenge to August 31 Minor Cycle high in S&P at 1230.71 with subsequent follow-through to Head and Shoulders Neckline resistance at 1230.71.
• 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 for past month.
• Price action and volume since August lows is consistent with bear move retracement.
• Despite possibility for rebound toward 1255--S&P, we continue to believe it’s a remote possibility major resistance at Neckline level in S&P 500 will be overcome.
• Ongoing failure of CPFL to show any enthusiasm for market on upside is bearish.
• In event another wave of selling develops, it is likely Momentum on long-term trend will turn negative to confirm a reversal of bull trend in effect since March 2009.

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