Market tracing short-term ‘continuation’ pattern

Market Snapshot for session ending 11-14-11:

 

Last

Day Change

%Change

S&P 500 Index

1251.78

-12.07

-.96%

Dow Jones Industrials

12078.98

-74.72

-.61%

NASDAQ Composite

2657.22

-21.53

-.80%

Value Line Arithmetic Index

2703.35

-35.01

-1.28%

Minor Cycle
(Short-term trend lasting days to a few weeks)
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:

  • Selling in S&P 500 Monday left bellwether index about midway in trading range that has been developing for nearly three weeks.
  • Range is bounded on upside by October 27 intraday high (1292.66) and on downside by November 1 intraday low (1215.42).
  • Consolidation has some of earmarks of “Symmetrical Triangle” formation, a chart pattern which can act as a continuation formation.
  • October 27 high must be must be exceeded to re-assert Intermediate Cycle positive.
  • Short-term trend remains “Neutral,” Intermediate Cycle remains positive, albeit moderately “Overbought” while Major Cycle remains near “Neutral.”
  • S&P 500 remains stalled in vicinity of ‘Neckline” of Head and Shoulders Top that was evident prior to and into the early August and early October lows. Neckline is now acting as initial resistance and can impede further strength.
  • Daily Most Actives Advance/Decline Line (MAAD) rallied to new short-term high last Friday and remains somewhat stronger than broad market. Daily MAAD Ratio was last near “Neutral.”
  • Cumulative Volume in both S&P 500 and S&P Emini has been in synch with S&P, but on relative basis has not recovered as much of decline from May high as has S&P index. -- Call/Put Dollar Value Flow Line (CPFL) continues to underperform broad market
Index Daily stops Weekly Monthly
11/14 11/15 11/16 11/17 11/18 11/18 11/30

S&P 500
Index

SELL
1236.41

SELL
1240.35

SELL
1237.92

SELL
1235.59

SELL
1235.81

SELL
1126.98

BUY
1325.13

Dow Jones
Industrials

SELL
11829.88

SELL
11862.70

SELL
11841.37

SELL
11827.08

SELL
11835.63

SELL
10803.00

BUY
12357.72

NASDAQ
Composite

SELL
2645.79

SELL
2651.83

SELL
2645.55

SELL
2635.99

SELL
2636.86

SELL
2413.64

BUY
2795.45

Value Line
Index

SELL
2684.63

SELL
2690.54

SELL
2683.54

SELL
2675.95

SELL
2674.09

SELL
2392.31

BUY
3027.66

Market Overview – What We Think:

  • It’s possible trading range developing in S&P 500 since October 27 intraday high could prove to be consolidation pattern within context of positive next larger Intermediate Cycle.
  • To prove point, S&P must rally first above down sloping trendline last plotted near 1275 with subsequent upside follow-through above October 27 intraday high at 1292.66.
  • Lacking net strength to new short-term highs and absorption of overhead resistance stretching to 1370.58, and to a new Major Cycle high, we must regard all strength as a mere “return action” rally within context of longer-term top.
  • But if S&P is able to better 1292.66, net hesitation in market over past few weeks that led to elimination of “Overbought” conditions with “Neutral” readings now prevailing could be suggestion market is on verge of another up leg within context of Intermediate Cycle positive.
  • Failure of CPFL to demonstrate little net strength since October lows could continue to act as drag on market.

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