S&P destroys three-week uptrend; support at 1200

Market Snapshot for session ending 11-17-11:

Market Overview – What We Know:

• Further market losses Thursday not only amplified market negativity, but S&P 500 sold down below three-week-old uptrend line after fracturing lower edge of 10-Day Price Channel Wednesday. Action has confirmed probable Minor Cycle reversal to negative.
• Short-term trend remains “Neutral” with a negative bias. Intermediate Cycle remains positive, albeit moderately “Overbought.” Major Cycle remains near “Neutral.”
• Despite market weakness, MAAD was somewhat less negative Thursday than S&P 500. Daily MAAD Ratio was last trending lower toward “Oversold” territory.
• Cumulative Volume in S&P 500 and S&P Emini was last trending lower with CV more negative in Emini than in cash S&P.
• Call/Put Dollar Value Flow Line (CPFL) continues to underperform broad market by wide margin and could sink to new lows with little additional effort. CPFL Ratio was negative Thursday by 2.17 to 1.

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Market Overview – What We Think:

• Downside break below three-week-old uptrend line Thursday with confirming action below already challenged 10-Day Price Channel Wednesday may have initiated short-term pullback we have been suggesting as a possibility.
• Only other possibility we could see developing is weakness over past few days could prove to be “C” leg of A-B-C pullback with downside measured move target toward 1200—S&P 500.
• If S&P stabilizes near 1200 and rallies, index would have to move above downtrend line near 1265 to suggest end to consolidation underway since October 27 high at 1292.66.
• If S&P does not have power to rally, index could still decline as low as 1126.98 without turning larger and still favorable, but moderately “Overbought,” Intermediate Cycle negative.
• Until S&P breaks decidedly negative and sinks below possible A-B-C measured move target at 1200—S&P 500, 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.
• Lacking a quick end to recent selling and a resumption of buying to new short-term highs (above 1292.66—S&P 500) and absorption of overhead resistance stretching to 1370.58, we must regard all strength as “return action” rally within context of developing Major Cycle top.

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