Market eliminates minor hurdles, but resistance looms

Market Snapshot for session ending 10-12-11:

 

Last

Day Change

%Change

S&P 500 Index

1207.25

+11.71

+.98%

Dow Jones Industrials

11518.85

+102.55

+.90%

NASDAQ Composite

2604.73

+21.70

+.84%

Value Line Arithmetic Index

2590.56

+41.57

+1.63%

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

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

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

Market Overview – What We Know:

  • Intermediate Cycle gained further credence with strength Wednesday as trading volume in S&P 500 increased by 22%.
  • Cumulative Volume in S&P 500 and S&P Emini has improved with prices over past several days, but remains weaker than pricing on relative basis.
  • Intermediate Cycle Price Channel high (1241.71) in S&P 500 looms just ahead and could also act as statistical resistance.
  • Via intraday high Wednesday S&P 500 moved up through defined trendline (1214) connecting August 31 and September 20 intraday highs (1230.71 and 1220.39).
  • Short-term Momentum and our proprietary Trading Oscillators remain positive, but all are toward “Overbought” territory on Minor Cycle.
  • Intermediate Cycle remains “Oversold” and in zone of opportunity.
  • Major Cycle Momentum remains marginally negative in all of major indexes.
  • Daily MAAD was positive again Wednesday with 18 issues higher and 2 negative. Indicator remains below defined downtrend line stretching back to early March statistical high on daily cycle.
  • CPFL was negative again Wednesday and indicator declined to new Intermediate Cycle low with negative Daily CPFL Ratio of 1.06 to 1.

Market Overview – What We Think:

  • “Oversold” Intermediate Cycle continued to underscore upside potential with further gains Wednesday toward Intermediate Cycle Price Channel high (1241.71). If that level is broken on upside, and even though short-term trend could be subject to profit-taking, additional gains could develop over next several weeks.
  • But with significant resistance looming from 1255 up to May high in S&P 500 at 1370.58, while Intermediate Cycle could improve, market could fail in face of major resistance.
  • Fact that Cumulative Volume remains weaker than prices could be sign market internals remain weaker than market looks.
  • Additional fact that CPFL made another new low Wednesday is further evidence that market sentiment, as measured by activity of options players, is still poor.
  • If Intermediate Cycle gains positive traction, strength will depend on market’s ability to overcome and absorb resistance as intermediate “Oversold” conditions are eliminated.

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