Stock index surge nearing critical level

Market Snapshot for session ending 10-6-11:

 

Last

Day Change

%Change

S&P 500 Index

1164.97

+20.94

+1.83%

Dow Jones Industrials

11123.33

+183.37

+1.68%

NASDAQ Composite

2506.82

+46.31

+1.88%

Value Line Arithmetic Index

2489.62

+61.75

+2.54%

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

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

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

Market Overview – What We Know:

  • S&P 500 is rapidly closing in on 10-Day Price Channel resistance (1175.59 through Friday) and short-term downtrend (1185.00), latter of which stretches back to May high and Intermediate Cycle top.
  • Trading volume in S&P 500 was lower Thursday by nearly 10%.
  • Cumulative Volume rose in both S&P 500 and S&P Emini futures contract, but CV in both is simply in synch with prices in that indicator has rallied back into midst of resistance formed throughout August consolidation.
  • Short-term Momentum remains negative, but was last moving higher toward neutral levels.
  • Intermediate Cycle remains “Oversold.”
  • Major Cycle Momentum remains negative in all of major indexes.
  • Daily MAAD was higher again Thursday with 19 issues positive and 1 negative. MAAD, like CV, has remained in step with market over past few sessions.
  • Daily MAAD remains toward levels not seen since late July 2009 when S&P 500 was toward 990.
  • CPFL was higher for second session in row, but indicator nonetheless remains in defined short- to intermediate-term downtrend and has not responded to buying over past few sessions to same extent as have prices.

Market Overview – What We Think:

  • Index prices as measured by S&P 500 are rapidly returning to “point of decision” in that strength above downtrend stretching back to May highs could suggest beginning of end to five month old decline.
  • Strength above 10-Day Price Channel (1175.59—S&P 500) would likely lead to follow-through above defined downtrend line.
  • Upside failure at this point could possibly be followed by “test” of October 4 low (1074.77—S&P 500) and new low for move.
  • Lacking new lows or a decisive break to upside above defined downtrend line, time is running out on intermediate decline since deeply “Oversold” conditions on Intermediate Cycle will inevitably take hold with higher prices developing.
  • Shift to more positive flavor by options players could be an early sign market’s downside bias may be abating.

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