Market sinks, but oversold in midst of support

Market Snapshot for session ending 11-21-11:

 

Last

Day Change

%Change

S&P 500 Index

1216.30

-20.78

-1.68%

Dow Jones Industrials

11770.73

-134.85

-1.13%

NASDAQ Composite

2587.99

-51.62

-1.963%

Value Line Arithmetic Index

2633.53

-45.59

-1.708%

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

Intermediate Cycle
(Medium trend lasting weeks to several months)
Positive / Neutral

Major Cycle
(Long-term trend lasting several months to years)
Positive / Neutral

Market Overview – What We Know:

  • Sharp losses Monday in broad market extended short-term negativity in major indexes.
  • S&P 500 has settled back onto upper edge of downtrend line, now acting as support, connecting August 31 intraday high at 1230.71 and September 20 intraday high at 1220.39 (see accompanying charts).
  • S&P 500 has also moved into upper ranges of zone of support stretching from August 31 intraday high at 1230.71 down to October 4 intraday low at 1074.77.
  • Since “Neutral” readings currently evident on Minor Cycle can be followed by higher prices, it remains to be seen if Minor Cycle is closer to low than not.
  • So long as Intermediate Cycle as measured by 10-Week Price Channel is not seriously threatened at 1138.76 (see table below), short-term selling could prove to be weakness within context of larger cycle positive.
  • To reassert Intermediate Cycle uptrend begun after October low (1074.77—S&P 500), however, S&P would have to better October 27 intraday high at 1292.66.
  • Most Actives Advance/Decline Line (MAAD) was in synch with broad market Monday and sold down to new short-term low. Daily MAAD Ratio has moved back into “Oversold.” Territory. Indicator on longer term has continued to underperform broad market, a suggestion Smart Money remains skeptical of longer-term stock market prospects.
  • Call/Put Dollar Value Flow Line (CPFL) remains remarkably weaker than market and could sink to new lows with little additional effort.
Index Daily stops Weekly Monthly
11/21 11/22 11/23 11/24 11/25 11/25 11/30

S&P 500
Index

BUY
1263.27

BUY
1263.88

BUY
1263.41

BUY
1258.64

BUY
1251.75

SELL
1138.76

BUY
1325.13

Dow Jones
Industrials

BUY
12104.57

BUY
12122.27

BUY
12125.89

BUY
12096.09

BUY
12051.40

SELL
10891.88

BUY
12357.72

NASDAQ
Composite

BUY
2683.38

BUY
2686.28

BUY
2686.86

BUY
2677.36

BUY
2661.42

SELL
2442.51

BUY
2795.45

Value Line
Index

BUY
2743.53

BUY
2742.54

BUY
274115

BUY
2730.06

BUY
2714.00

SELL
2414.39

BUY
3027.66

Market Overview – What We Think:

  • While Monday’s losses in stock market underscored recent negativity on short-term trend, proximity of prices to trendline support and developing “Oversold” conditions on Minor Cycle suggest market, as measured by S&P 500, could be much closer to a short-term negative end game than the beginning of another serious down leg.
  • Ability of market to find support in sessions just ahead will determine not only the power of current short-term negative, but also of larger Intermediate Cycle positive.
  • Ultimately, pullback within context of larger cycle positive could mean market countertrend action could prove to be shallow.
  • To prove a bullish point, S&P must rally back above 1292.66 at October 27 intraday high.
  • Issue then becomes longer term in that market must be able to make new highs and will indicators then confirm that action? Failure by one or both would underscore potential for longer-term bearish outcome. Simply put, 1370.58—S&P must be overcome to re-assert bull trend begun in March 2009.
  • With key indicators still exhibiting lackluster performance, we can only continue to wonder at market’s longer-term upside prospects since lack of indicator confirmation has never favored bullish case on historical basis.

Click charts to enlarge

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