Reflex rally likely over as MAAD sinks to new low

Market Snapshot for session ending 9-22-11:

 

Last

Day Change

%Change

S&P 500 Index

1129.56

-37.20

-3.19%

Dow Jones Industrials Average

10733.83

-391.00

-3.51%

NASDAQ Composite Index

2455.67

-82.51

-3.25%

Value Line Arithmetic Index

2383.36

-86.53

-3.50%

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

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

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

Market Overview – What We Know:

  • Heavy selling Thursday caused bids in bellwether S&P 500 to decline below defined short-term uptrend line (1147) stretching back to August lows.
  • Losses forced Dow Jones Industrial and Transportation Averages to new lows for the move, action which reasserts long-term Dow Theory SELL signal.
  • Cumulative Volume in S&P 500 sank to new low even though S&P has yet to fall below August 9 intraday low at 1101.54. Thursday’s low was quoted at 1114.22.
  • Cumulative Volume in both Dow 30 and 20 sank to new lows to confirm weakness.
  • Value Line Index also declined to new low for move.
  • Thursday’s trading volume in S&P 500 rose by nearly 42%.
  • S&P short-term Momentum is now negative along with our two proprietary Trading Oscillators.
  • Net negativity in MAAD pushed indicator to new low and levels not seen since early February 2010.
  • CPFL was negative Thursday by 4.32 to 1, but the indicator has yet to hit new low.
  • Intermediate Cycle remains negative with Major Cycle in jeopardy.

Market Overview – What We Think:

  • Odds are good that Thursday’s selling in major indexes “officially” terminated short-term reflex rally begun after early August lows even though some short-covering could develop over next couple of sessions.
  • Confirmation of weakness to new lows for move by Cumulative Volume in S&P 500, Dow 30, and Dow 20 with S&P Emini close to a downside negative confirmation simply underscored market’s internal weakness.
  • Fact that MAAD also sank to new low Thursday is further evidence “Smart Money” has found little reason to be long this market since MAAD peaked back on March 3.
  • Net negativity Thursday in CPFL pushed options indicator downward and toward recent indicator lows while underscoring notion options players also see little reason to be long this market.
  • With short and intermediate-term trends trending negatively, odds favor a reversal of Major Cycle Momentum to negative to signal reversal of long-term positive of move initiated March 2009.

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