Market fades marginally Monday on lower volume

Market Snapshot for session ending 9-19-11:

Market Overview – What We Know:

• Losses Monday used up another session on short-term trend to extent Minor Cycle is running out of time and S&P 500 prices remain stuck between major resistance (1255-1270) and August low (1101.54).
• Short-term uptrend line in S&P was last plotted just below 1144, the level which must be decisively fractured on downside to suggest an end to short-term uptrend initiated in early August.
• Mondays’ trading volume in S&P 500 declined by just over 25%.
• Next level of minor resistance holds at August 31 intraday high (1230.71--S&P 500).
• Short-term Momentum was last negative while our two proprietary Trading Oscillators remain positive.
• Cumulative Volume in both S&P 500 Index and S&P Emini pulled back marginally Monday. CV in S&P Emini remains stronger than in cash S&P to extent CV in futures contract rallied to new short-term high last week even though prices have yet to follow suit.
• Rally since early August lows continues to have “appearance” of classic reflex rally within context of Intermediate Cycle negative. Strength above 1230.71 would leave major resistance at 1255-1270 and Head and Shoulders “Neckline” recently fractured on downside.
• After two days of positive readings daily CPFL was net negative Monday by 1.08 to 1.
• Daily MAAD was negative Monday by 4 to 1.

Market Overview – What We Think:

• While Monday’s price weakness could prove to be temporary, nothing but net strength above August 31 intraday and short-term high at 1230.71 will be required to position S&P 500 index for run toward major resistance at Head and Shoulders “Neckline” (1255-1270).
• If strength develops in S&P back above 1230.71, we could see completion of “C” leg of A-B-C rally on short-term cycle.
• Break above 10-Day Price Channel at 1204-1205 last week gives credence to potential for further positive rebounding providing volume confirms strength.
• We continue to think price action since August lows is consistent with bear move reflex rally on Minor Cycle.
• We also think its unlikely major resistance at “Neckline” level of S&P 500 (1255-1270) will be overcome before short-term trend reverses to negative.
• If more weakness develops in earnest, its likely Momentum on long-term trend will turn negative to confirm a reversal of larger bull move in effect since March 2009.

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