Equity rally runs into strong resistance

Market Snapshot for session ending 9-27-11:

 

Last

Day Change

%Change

S&P 500 Index

1175.38

+12.43

+1.07%

Dow Jones Industrials

11190.69

+146.82

+1.33%

NASDAQ Composite

2546.83

+30.14

+1.20%

Value Line Arithmetic Index

2513.03

+46.71

+1.89%

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

  • Another day of gains Tuesday brought bids in the S&P 500 back toward initial resistance (1220.39) put in place via an intraday high on September 20. Minor Cycle resistance remains at 1230.71 created August 31.
  • Cumulative Volume remains relatively weak, however, and has only recovered about ½ of the losses since September 20 even though prices have done somewhat better.
  • CPFL declined to a new lows Tuesday, despite market gains.
  • S&P 500 needs to decline below August 9 intraday low (1101.54) to make a new low for the move initiated after the May 2 high (1370.58) and must better the August 31 intraday high (1230.71) to suggest a possible reversal of the Intermediate Cycle to positive..
  • Short-term readings have returned to neutral levels.
  • Tuesday’s trading volume in S&P 500 increased by about 1%.\
  • MAAD improved again Tuesday, but remains not far from new lows made last Thursday.

Market Overview – What We Think:

  • Ongoing deterioration in CPFL suggests short-covering rally and countertrend strength on short-term cycle within context of larger intermediate term negative.
  • Solid resistance up to August 31 intraday high in S&P 500 (1230.71), let alone back to “Neckline” of Head and Shoulders pattern (1255) recently broken on downside, suggests odds are remote market will be above to overcome significant resistance.
  • While MAAD has demonstrated modest improvement over past few sessions, it would take little net selling to push indicator to new lows on Minor Cycle while positioning indicator for serious threat to March 2009 indicator lows on larger weekly trend to underscore fact “Smart Money” remains disenchanted with market.
  • 10-Day Price Channel statistical resistance (1205.21--S&P 500 on Wednesday) could contain near-term strength.

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