Major stock indexes hit new lows as indicators confirm

Market Snapshot for session ending 10-3-11:

 

Last

Day Change

%Change

S&P 500 Index

1099.23

-32.19

-2.85%

Dow Jones Industrials

10655.30

-258.07

-2.36%

NASDAQ Composite

2335.83

-79.56

-3.29%

Value Line Arithmetic Index

2274.88

-110.17

-4.62%

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:

  • All of major indexes close at new lows on Monday, but only S&P 500 and Value Line index also move below early August intraday lows (1101.54—S&P 500).
  • Cumulative Volume moves to new lows in all indexes to underscore market weakness.
  • While short-term Momentum remains negative, indicator did not make new low in any index. Indicator remains above lowest levels of early August bottom.
  • Monday’s selling caused Major Cycle Momentum to move into negative territory. If index prices remain at or below current levels by end of October, long-term Momentum will have confirmed reversal of Major Cycle trend begun in March 2009 to negative.
  • Most Actives Advance/Decline Line (MAAD), using daily data, declined to new low for move with 1 issue positive and 19 negative.
  • Daily MAAD is at lowest level since July 30, 2009 when S&P 500 closed at 986.75.
  • Call/Put Dollar Value Flow Line (CPFL) declined to new low for move with Puts on Dollar Value basis exceeding calls by 3.83 to 1.
  • Minor and Intermediate Cycles remain “Oversold” with Major Cycle toward “Neutral.”

Market Overview – What We Think:

  • While Monday’s selling to new index price lows reaffirmed short to intermediate term negativity, fact short-term Momentum did not make new low could mean next short-term low will be followed by relatively decent upside bounce.
  • Fact that key indicators including MAAD, CPFL, and CV confirmed market weakness Monday is good sign for bears and could be suggestive of ongoing internal weakness of market internals, but short-term downside Momentum failure means, despite losses, market’s downward bias is not as strong now as it was into August lows. Such a divergence does not preclude further losses, however.
  • If Major Cycle Momentum readings remain negative through end of month, odds that bullish camp will come out of downtrend will be substantially diminished since unfavorable long-term Momentum would mean bull trend begun in March 2009 has ended.

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