Unsuspecting traders could be shocked by market surprise

Market Snapshot:



Week Chg

Week %Chg

S&P 500 Index




Dow Jones Industrials




NASDAQ Composite




Value Line Arithmetic Index




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

Intermediate Cycle
(Medium trend lasting weeks to several months)

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

Remember that movie, “The Perfect Storm”? If you haven’t seen it, the 2000 film starring George Clooney is about a crew on a fishing boat, the Andrea Gail that is ultimately lost at sea in a massive hurricane. Also relating to hurricanes, there is a Wall Street film called “The Perfect Hook.” But that spectacle involves a cast of millions and has been shown of and on over decades, the most recent viewing from late 2007 through early 2009 when more than one investor saw his portfolio blown away in another great hurricane. It’s only a matter of time before “The Perfect Hook” plays again. As always, it will only show in front of a mostly unsuspecting audience.

We’re wondering about current “hook’ potential. Following the October low (1074.77—S&P 500) a minor rally developed and a short-term “overbought” condition soon followed. The market then pulled back to supports near the bottom edge of 10-Week Price Channels under the auspices of a new Intermediate Cycle positive. That low was as deeply overdone on the downside as at any Minor Cycle low over the past several years. The market then rallied sharply, including last Wednesday’s powerful buying, but stalled at a defined short-term downtrend line (near 1250--S&P 500) extending back to the October 27 intraday high (1292.66). Now it remains to be seen if the Minor Cycle trendline, let alone 1292.66 at the October short-term high, will be overcome since those levels must be surpassed for the larger and still positive Intermediate Cycle to get back into play.

Market Overview – What We Know:

  • S&P 500 remains stuck at short-term downtrend line (1250-1255--S&P 500) stretching back to October 27 intraday and short-term resistance high (1292.66). S&P must better trendline level and then 1292.66 to re-assert Intermediate Cycle advance begun after October 4 low (1074.77).
  • Market has been unable to overcome short-term resistance since last Wednesday’s powerful rally.
  • All cycles remain near “Neutral.”
  • Most Actives Advance/Decline Line (MAAD) was flat again Friday, but MAAD Daily Ratio remains in zone of opportunity in that it is still moderately “Oversold.”
  • MAAD on longer term cycle remains precariously close to major cycle low created into March 2009 lows just a week after sinking to lowest level since early February 2010. Weekly MAAD Ratio was last near “Neutral.”
  • Call/Put Dollar Value Flow Line (CPFL) was negative again on Friday by 1.25 to 1. CPFL continues to exhibit little upside enthusiasm and has remained in net negative trend since February 25, 2011.
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