S&P fades at downtrend line, must surpass 1292.66

Market Snapshot for session ending 12-1-11:

Market Overview – What We Know:

• S&P 500 remains stuck right at short-term downtrend line stretching back to October 27 intraday and short-term resistance high (1292.66). Trendline crossover point on upside is at about 1250.00. S&P must better that level and then 1292.66 to re-assert Intermediate Cycle advance begun after October 4 low (1074.77).
• Volume in S&P 500 sank Thursday by 32% relative to Wednesday’s levels.
• Most of our short-term trend indicators have moved back to “Neutral” from recent deeply “Oversold” levels.
• Wednesday’s sharp gain caused S&P 500 to rally above upper edge of 10-Day Price Channel (1233.89), a positive first sign on Minor Cycle.
• Most Actives Advance/Decline Line (MAAD) was neutral Thursday. MAAD Daily Ratio remains deeply “Oversold.”
• Call/Put Dollar Value Flow Line (CPFL) was negative Thursday by 1.11 to 1. Indicator remains decidedly lackluster relative to index prices.

Market Overview – What We Think:

• Until S&P 500 can decisively break above month-old downtrend line stretching back to October 27 intraday and short-term high at 1292.66, staying power of short-term uptrend remains in doubt.
• But, if it turns out pullback from October 27 to November 25 was a “B” leg correction in an A-B-C rally begun after October 4 low, then upside measured move to 1376.55 comes into view. Level would create a new high for move since March 2009 and would better May 2011 peak by several points.
• But with all of our key indicators (MAAD, CPFL, CV, and Momentum) lagging pricing, move could prove to be massive market hook.
• Another possibility is that market simply fails to overcome major resistance up to 1370.58 and Intermediate Cycle top is created somewhere this side of there. That scenario would feed into presumption all price strength since October lows has been bear market retracement.
• Key to current Intermediate Cycle uptrend will be market’s ability to over come massive resistance stretching up to May high at 1370.58.

Click charts to enlarge

Next page: Indicator review