S&P nears statistical resistance, CPFL turns positive

Market Snapshot for session ending 9-14-11:

 

Last

Net Change

%Change

S&P 500 Index

1188.68

+15.81

+1.35%

Dow Jones Industrials Average

11246.73

+140.88

+1.27%

NASDAQ Composite Index

2572.55

+40.40

+1.60%

Value Line Arithmetic Index

2593.68

+45.71

+1.79%

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

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:

  • Further gains in S&P 500 Wednesday moved bellwether back to top edge of defined 10-Day Price Channel (1204-1205).
  • Trading volume in S&P rose 13% on strength.
  • Short-term Momentum and Trading Oscillators were last positive in S&P.
  • While Cumulative Volume has remained weak to extent indicator in S&P did not confirm price strength to August 31 short-term high (1230.71) recent pullback in price was not confirmed on downside by CV. As a consequence, CV was last exhibiting neutral readings in terms of indicator’s chart action.
  • Price action since August lows continues to look like bear trend reflex rally within context of Intermediate Cycle negative. But strength above 1230.71 would suggest a quick rally to major resistance at Head and Shoulders “Neckline” (1255-1270).
  • Resolution of bear flag pattern would require downside break of trendline stretching back to August lows.
  • After 28 days of net negativity, Daily CPFL was marginally positive Wednesday with Ratio last favorable by 1.17 to 1.
  • Daily MAAD was positive Wednesday with 17 issues ahead and 3 negative.

Market Overview – What We Think:

  • Increase in upside volume in S&P Wednesday on market strength could be sign short-term trend could make further gains.
  • But S&P’s stall just below upper edge of 10-day Price Channel (1204-1205) means that level is key statistical resistance that must be overcome to suggest follow-through toward Head and Shoulder “Neckline” resistance beginning at 1255 (to 1270).
  • An upside failure this side of 1204-1205 and Price Channel resistance would mean that selling pressures are too great and that reflex rally begun in early August is over.
  • In any case, we do not think this rally has a lot of time or room left.
  • Price action since August lows is consistent with bear move retracement.
  • Despite possibility for rebound toward 1255--S&P, we continue to think its unlikely major resistance at Neckline point of S&P 500 (1255-1270) will be overcome.
  • Breaking of losing streak Wednesday in CPFL after 28 days of net negativity is favorable sign, but positive change has probably come in the latter stages of short-term rally that is likely in end game, or close to it.
  • 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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