S&P above channel support, but Oct. 27 high holds

Market Snapshot for session ending 11-3-11:

 

Last

Day Change

%Change

S&P 500 Index

1261.15

+23.25

+1.88%

Dow Jones Industrials

12044.47

+208.43

+1.76%

NASDAQ Composite

2697.97

+57.99

+2.20%

Value Line Arithmetic Index

2753.55

+59.80

+2.22%

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

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

Major Cycle
(Long-term trend lasting several months to years)
Positive

Market Overview – What We Know:

  • S&P 500 bounced off lower edge of 10-Day Price Channel and statistical support for third session in row on Thursday. That level, if broken on downside, would suggest end to short-term advance begun after October 4 lows (1074.77—S&P 500).
  • Volume in S&P rose nearly 12% Thursday.
  • Cumulative Volume in both S&P 500 and S&P Emini futures contracts remains anemic relative to S&P pricing. Whereas S&P has recovered about 75% of price losses since May high, CV in S&P has only recovered about 50%.
  • Prices in S&P 500, Dow Jones Industrials, NASDAQ Composite index, and Value Line Index remain above upper edges of 10-week Price Channels to underscore still positive Intermediate Cycle.
  • MAAD was positive Thursday by 5.6 to 1 with MAAD Daily Ratio last holding near “Neutral.”
  • CPFL was marginally higher Thursday, but options players remain unconvinced of market’s upside prospects, given lack of overall upside performance in CPFL.
Index Daily stops Weekly Monthly
10/31 11/1 11/2 11/3 11/4 11/4 11/30

S&P 500
Index

SELL
1208.42

SELL
1212.80

SELL
1215.42

SELL
1221.75

SELL
1233.11

SELL
1135.43

BUY
1325.13

Dow Jones
Industrials

SELL
11495.88

SELL
11537.74

SELL
11576.00

SELL
11641.52

SELL
11751.18

SELL
11549.90

BUY
12357.72

NASDAQ
Composite

SELL
2603.64

SELL
2610.14

SELL
2608.74

SELL
2624.78

SELL
2644.13

SELL
2415.40

BUY
2795.45

Value Line
Index

SELL
2570.63

SELL
2585.21

SELL
2594.56

SELL
2619.89

SELL
2655.73

BUY
2431.21

BUY
3027.66

Market Overview – What We Think:

  • Unless S&P 500 is able to better October 27 intraday and recent short-term high at 1292.66, odds are good near-term advance underway since October 4 low (1074.77) is in an endgame.
  • Index prices have found support along lower edge of 10-Day Price Channel (see table above), but that tendency will not continue indefinitely if S&P is unable to make a new Minor Cycle high.
  • If S&P proves unable to make new short-term high and Minor Cycle gives way to more selling, what is at stake is the viability of next larger Intermediate Cycle. Given poor showing of Cumulative Volume (CV) since October lows, it remains to be seen how much damage a short-term pullback might cause larger cycles to suffer.
  • In addition, so long as major resistance (1370.58) back at those May highs holds, there is an underlying suggestion all strength back to those highs is merely “return action” within context of Major Cycle which remains iffy at this juncture and which could flip back to negative from currently “Neutral” readings with ease..
  • Options players, as measured by CPFL, apparently think strength above May major resistance is unlikely, given fact indicator remains lackluster and could easily reach new lows.
  • Similarly, MAAD has only recovered about 50% of its losses from May high whereas S&P retraced nearly 75% of its losses into October 27 highs. Divergence could prove to have lingering negative effect of index prices once short-term high is put in place.

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