Thursday’s stock buying looked like short-covering rally

Market Snapshot for session ending 11-10-11:

 

Last

Day Change

%Change

S&P 500 Index

1239.69

+10.59

+.86%

Dow Jones Industrials

11893.86

+112.91

+.96%

NASDAQ Composite

2625.15

+3.50

+.13%

Value Line Arithmetic Index

2676.25

+22.40

+.84%

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:

  • Major indexes recouped part of Wednesday’s losses on Thursday with S&P 500 gaining 27.6% with Dow Jones Industrial Average up 29.0%. NASDAQ Composite only rallied back 3.3% with Value Line Index ahead18.5%.
  • Failure of lower priced issues to recover as much as S&P 500 and Dow 30 suggests strength was more a blue chip rally than broad based market strength.
  • S&P 500 was last positioned just above lower edge of 10-Day Price Channel and downside trigger point for negative short-term cycle.
  • 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 (1255-1370.58—S&P 500) of Head and Shoulders top 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 remains weak relative to index pricing in that while S&P 500 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) remains market sensitive with indicator holding near downtrend line stretching back to indicator high in early March. MAAD Daily Ratio remains near “Neutral.”
  • Call/Put Dollar Value Flow Line (CPFL) was negative Thursday by 1.8 to 1 while indicator continues to underperform 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:

  • Thursday’s strength could prove to be mere short-covering rally following previous session’s sharp losses.
  • So long as S&P 500 remains below October 27 intraday high (1292.66), Minor Cycle will remain vulnerable. More corrective action could follow. If nothing else, additional time below resistance high will allow currently moderately “Overbought” conditions on Minor Cycle to be eliminated.
  • S&P 500 could sink over 100 points (to 1121.98) before lower edge of 10-week Price Channel (see table above) would be fractured to suggest serious challenge to Intermediate Cycle positive. Odds of such weakness are possible, but not probable. Short-term “Oversold” conditions would likely develop before such price weakness unfolded.
  • Ongoing failure of CPFL to demonstrate any upside follow through is 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. Divergence could prove to have lingering negative effect on index prices.
  • So long as major resistance (1255-1370.58—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 uncertain.

Click charts to enlarge

Next page: Indicator review

Page 1 of 2 >>
Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome