S&P must exceed 1292.66 to keep cycle positive

Market Snapshot for session ending 11-8-11:

 

Last

Day Change

%Change

S&P 500 Index

1275.92

+14.80

+1.17%

Dow Jones Industrials

12170.18

+101.79

+.84%

NASDAQ Composite

2727.49

+32.24

+1.20%

Value Line Arithmetic Index

2774.41

+34.17

+1.25%

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:

  • Yet again and for sixth day in row, stock market as measured by S&P 500, powered higher Tuesday following early session weakness.
  • S&P 500 is re-approaching October 27 intraday high (1292.66) and level that must be exceeded for index to re-assert short-term advance begun after October 4 low (1074.77).
  • October 27 high is also coincident with slightly upsloping “Neckline” trend line of Head and Shoulders top broken on downside in early August. That level is now acting as resistance.
  • Failure of S&P 500 to better October 27 high would suggest end to two-month-old advance if bids also sink below lower edge of 10-Day Price Channel (see table below). Price Channel must be fractured on downside to confirm end of Minor Cycle positive.
  • Short-term trend nonetheless remains positive and moderately “Overbought.”
  • Intermediate Cycle remains positive and near “Neutral” to moderately “Overbought.”.
  • Major Cycle remains near “Neutral.”
  • Cumulative Volume in both S&P 500 and S&P Emini futures contracts remains weaker than 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) has improved over past several sessions and was last flirting with October 27 plot high. If indicator breaks that level on upside, such action would be positive for broad market. MAAD Daily Ratio remains near “Neutral” in zone of opportunity.
  • Call/Put Dollar Value Flow Line (CPFL) improved marginally Tuesday with the Calls to Puts Dollar Volume Ratio holding at 2.92 to 1 in favor of calls. On net basis, however, CPFL continues to underperform the broad market.
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:

  • Choices are relatively easy as far as short-term trend in S&P 500 is concerned – if index fails to make new high above 1292.66, odds are good short-term trend will soon fade to negative. If new short-term high is made, strength will enforce positive bias of larger Intermediate Cycle.
  • If S&P 500 is 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.”
  • So long as major resistance (1370.58—S&P 500) holds, there is underlying suggestion all strength back toward resistance highs is merely “return action” within context of Major Cycle that remains iffy with a negative tone.
  • CPFL has shown some improvement over past several days, but call buying relative to puts on Dollar Value basis has been marginal and underscores 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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