Market reverses Minor Cycle to negative; correction looms

Market Snapshot for session ending 11-9-11:

 

Last

Day Change

%Change

S&P 500 Index

1229.10

-46.82

-3.67%

Dow Jones Industrials

11780.94

-389.23

-3.20%

NASDAQ Composite

2621.65

-105.84

-3.88%

Value Line Arithmetic Index

2653.84

-120.56

-4.35%

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

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:

  • Sharp losses in stock market Wednesday probably ended short-term uptrend begun after October low (1074.77—S&P 500).
  • Wednesday’s selling caused S&P 500 to drop below lower edge of 10-Day Price Channel with short-term Momentum also turning negative.
  • S&P and other indexes failed to better October 27 intraday high (1292.66—S&P) via “return action” rally over past several days.
  • Prices also stalled out in face of “Neckline” resistance of Head and Shoulders broken on downside in early August.
  • 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 dropped on Wednesday in conjunction with price weakness. While S&P has recovered about 65% of price losses since May high, CV in S&P 500 and S&P Emini only recovered about 50% prior to Wednesday’s losses.
  • Daily Most Actives Advance/Decline Line (MAAD) faded with market Wednesday. No issues advanced and 20 were negative. MAAD Daily Ratio remains near “Neutral.”
  • Call/Put Dollar Value Flow Line (CPFL) was negative Wednesday by 2.91 to 1. On net basis CPFL continues to underperform broad market.
Index Daily stops Weekly Monthly
11/7 11/8 11/9 11/10 11/11 11/11 11/30

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:

  • Stock market’s yielding of a large negative verdict Wednesday in face of major resistance simply underscores our recent suspicions near-term vulnerability was brewing.
  • Failure to better October 27 intraday high (1292.66—S&P 500) with coincident move to negative by short-term Momentum is suggestion Minor Cycle will now correct recent excesses within context of Intermediate Cycle positive.
  • S&P 500 could sink over 100 points (to 1121.98) before lower edge of 10-week Price Channel (see table above) would to fractured to suggest serious challenge to Intermediate Cycle positive. Odds of such weakness are possible, but not probable before short-term stats set up for a rally.
  • Ongoing failure of CPFL to demonstrate any upside follow through is a lingering suggestion market internals remain weak.
  • Similarly, MAAD has been market sensitive lately, but 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.
  • 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.

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