S&P close to breaking downside minor support levels

Market Snapshot for session ending 11-16-11:

Market Overview – What We Know:

• Losses Wednesday in S&P 500 not only put index bids at lower edge of rising three-week-old trendline, but weakness left closing level of S&P just below lower edge of trailing 10-Day Price Channel.
• S&P is on verge of confirming reversal to negative on Minor Cycle.
• Ongoing failure of S&P to break above October 27 intraday high and near-term resistance (1292.66) is near-term bearish.
• S&P 500 also remains stalled in vicinity of ‘Neckline” of Head and Shoulders Top that was created prior to August selloff. That level is now acting as resistance.
• Short-term trend remains “Neutral” with marginally negative bias. Intermediate Cycle remains positive, albeit moderately “Overbought.” Major Cycle remains near “Neutral.”
• After holding in synch with market since November 1 S&P low, MAAD looked a bit weaker than broad market Wednesday. Daily MAAD Ratio was last back into moderately “Overbought” territory.
• Cumulative Volume in S&P 500 and S&P Emini has begun to deteriorate again. CV in Emini was last back below November 1 support low even though S&P Emini prices remain somewhat stronger.
• Call/Put Dollar Value Flow Line (CPFL) continues to underperform broad market by wide margin.

Market Overview – What We Think:

• Short-term trend in market as measured by S&P 500 is looking increasingly precarious. Wednesday’s 21 point loss in S&P to lower edge of near-term trendline (1230) and 10-Day Price Channel support (see table above) could mean more near-term selling is possible.
• But if such weakness develops it must be viewed within context of still positive Intermediate Cycle which could absorb Minor Cycle selling down to 1126.98 without turning intermediate trend negative.
• Larger Intermediate Cycle remains favorable but moderately “Overbought.”
• Until S&P breaks decidedly below near-term uptrend line near 1230 and even though 10-Day Price Channel was fractured by a couple of points on downside via Wednesday’s S&P close, we cannot rule out possibility trading range developing in S&P 500 since October 27 intraday high could prove to be consolidation pattern in positive larger Intermediate Cycle. Such is the nature of symmetrical triangle formations that can act as continuation patterns in larger cycle positive.
• But time is running out on a possible positive resolution of near-term price pattern.
• Lacking net strength to new short-term highs and absorption of overhead resistance stretching to 1370.58 we must regard all strength as “return action” rally within context of developing longer-term top.

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