S&P 500 rallies for second day on shrinking volume

Market Snapshot for session ending 9-13-11:

 

Last

Net Change

%Change

S&P 500 Index

1172.87

+10.60

+.91%

Dow Jones Industrials Average

11105.85

+44.72

+.40%

NASDAQ Composite Index

2532.15

+37.05

+1.49%

Value Line Arithmetic Index

2547.97

+41.38

+1.65%

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

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

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

Market Overview – What We Know:

  • S&P 500 gained marginally again Tuesday, but statistical resistance at upper edge of 10-Day Price Channel near 1204 remains with price resistance at August 31 intraday and short-term high holding at 1230.71.
  • Tuesday’s S&P trading volume declined another 7% on heels of Monday’s 10% drop on two days of higher prices. Declining volume on strength is consistent with bearish rebound.
  • Cumulative Volume remains weak to extent CV indicator has yet to overcome statistical resistance put in place August 15 while S&P prices rallied above similar price resistance (1208.47).
  • Price action since August lows continues to look like bear trend reflex rally with suggestion 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 28th day in a row, Daily CPFL declined to new short-term low Tuesday with Put Dollar Volume exceeding Call Dollar Volume by 1.20 to 1. Monday’s ratio was 1.38 to 1.
  • Daily MAAD was positive Tuesday with 14 issues ahead and 5 negative.

Market Overview – What We Think:

  • Small rebound over past two sessions could be losing upside momentum given deteriorating upside volume, but 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 1255 with an outside target to 1270.
  • Cumulative Volume failure in S&P 500 and S&P Emini to better mid-August indicator resistance is hint weaker hands have been fueling buying for past several weeks.
  • Price action and volume since August lows is consistent with bear move retracement.
  • Despite possibility for rebound toward 1255--S&P, we continue to think its very unlikely major resistance at Neckline point of S&P 500 (1255-1270) 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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