Stock index minor cycle trend positive, but tested

Market Snapshot for session ending 11-7-11:

 

Last

Day Change

%Change

S&P 500 Index

1261.12

+7.89

+.63%

Dow Jones Industrials

12068.39

+85.14

+.71%

NASDAQ Composite

2695.25

+9.10

+.34%

Value Line Arithmetic Index

2740.24

-.48

-.02%

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:

  • For 5th session in row S&P 500 “teased” lower edge of defined 10-Day Price Channel (see table below) before reversing to upside later in trading session.
  • Short-term trend nonetheless remains positive if not moderately “Overbought.”
  • Intermediate Cycle trend remains positive and near “Neutral” to moderately “Overbought.”.
  • Major Cycle remains near “Neutral.”
  • Volume in S&P 500 shrank nearly 9% Monday.
  • Cumulative Volume in both S&P 500 and S&P Emini futures contracts remains anemic relative to S&P pricing. While S&P has recovered about 65% of price losses since May high, CV in S&P 500 and S&P Emini has only recovered about 50%.
  • Daily Most Actives Advance/Decline Line (MAAD) continues to flirt with downtrend line stretching back to indicator high plot put in place March 3. After peaking on October 18, Daily MAAD Ratio has been internally correcting “Overbought” conditions and was last holding toward “Neutral” with Weekly MAAD Ratio was also toward “Neutral.”
  • While Call/Put Dollar Value Flow Line (CPFL) was slightly positive Monday at 1.13 to 1, indicator continues to exhibit weakness relative to index pricing. CPFL has demonstrated little upside strength since October lows in index prices and could sink to a new longer-term low with relative ease.
Index Daily stops Weekly Monthly
11/7 11/8 11/9 11/10 11/11 11/11 11/20

S&P 500
Index

SELL
1238.83

SELL
1236.71

SELL
1234.91

SELL
1235.63

SELL
1236.41

SELL
1121.98

BUY
1325.13

Dow Jones
Industrials

SELL
11810.23

SELL
11799.82

SELL
11788.52

SELL
11805.95

SELL
11818.00

SELL
11465.20

BUY
12357.72

NASDAQ
Composite

SELL
2654.82

SELL
2648.30

SELL
2644.59

SELL
2643.22

SELL
2645.46

SELL
2390.56

BUY
2795.45

Value Line
Index

SELL
2676.02

SELL
2674.32

SELL
2672.70

SELL
2675.98

SELL
2682.30

SELL
2387.11

BUY
3027.66

Market Overview – What We Think:

  • While odds are increasing that short-term rally begun after early October lows (1074.77—S&P 500) is about over, so long as S&P 500 holds above lower edge on 10-Day Price Channel, we cannot preclude higher prices, given extant positive trend.
  • If Minor Cycle advance is in an endgame and S&P proves unable to better October 27 intraday high (1292.66) and corrective action develops, what is at stake is viability of next larger Intermediate Cycle which has erased much of “Oversold” opportunity over past several weeks with readings now holding from “Neutral” to moderately “Overbought.”
  • As long as major resistance (1370.58—S&P 500) holds, there is an underlying suggestion all strength back toward resistance highs is merely “return action” within context of Major Cycle that remains iffy.
  • Options players, as measured by CPFL, continue to underscore notion that strength since October lows has been merely a reflex rally under bear cloud.
  • Similarly, MAAD has only recovered about 50% of its losses from May high whereas S&P retraced nearly 65% of its losses into October 27 highs. That divergence could prove to have lingering negative effect on index prices once short-term high is put in place.

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