Market dawdles below first resistance as time wastes

Market Snapshot for session ending 9-20-11:

Market Overview – What We Know:

• Market as measured by S&P 500 continues to hesitant marginally below minor resistance at August 31 intraday high (1230.71).
• Short-term uptrend line in S&P stretching back to August lows was last plotted at 1145 (Wednesday) at trendline which must be penetrated on downside to suggest end to short-term advance.
• Tuesday’s trading volume in S&P 500 was fractionally below Monday’s levels.
• Next level of minor resistance holds at August 31 intraday high (1230.71--S&P 500).
• Short-term Momentum was slightly negative Tuesday while our two proprietary Trading Oscillators remained positive.
• Cumulative Volume in S&P 500 Index and S&P Emini remains “mixed.” Cash S&P CV has yet to rally above indicator high made August 15 while S&P Emini CV has already bettered that level.
• Rally since early August lows continues to have “appearance” of reflex rally within context of Intermediate Cycle negative.
• Major resistance holds at 1255-1270 at Head and Shoulders “Neckline” fractured on downside prior to early August index lows.
• CPFL was net negative Tuesday by 1.80 to 1.
• Daily MAAD was negative Tuesday with 5 advances and 15 declines.

Market Overview – What We Think:

• Market hesitation over past two sessions could prove to be temporary, 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).
• Any weakness in S&P below lower edge of defined and rising short-term trend line last plotted at 1145 (Wednesday) would likely suggest an end to reflex rally in effect since early August lows.
• Break above 10-Day Price Channel at 1204-1205 last week gives credence to potential for further positive rebounding providing volume underscores strength.
• We continue to think price action since August lows is consistent with bear move reflex rally on Minor Cycle.
• We also think it 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.

Click charts to enlarge

Next page: Indicator review