Market faltering as minor overbought readings mature

Market Snapshot for session ending 12-6-11:

Market Overview – What We Know:

• Only Dow Jones Industrial Average posted appreciable gain Tuesday. S&P 500 Index was only slightly higher while NASDAQ Composite and Value Line Index were marginally negative.
• Short-term trend in S&P 500 nonetheless remains positive, but S&P must rise above 1292.66 to re-assert larger Intermediate Cycle uptrend begun after October lows.
• All cycles on short-term trend have moved back toward moderately “Overbought” levels.
• Most Actives Advance/Decline Line (MAAD) was negative Tuesday with 9 issues up and 11 down. MAAD Daily Ratio was last moving toward moderately “Overbought” territory from “Neutral.”
• MAAD on longer term cycle remains close to major cycle low created in March 2009. Weekly MAAD Ratio was last near “Neutral.”
• Call/Put Dollar Value Flow Line (CPFL) was negative Tuesday by 1.66 to 1 and has shown no positive confirmation of rally since October low. CPFL has remained in net negative trend since February 25, 2011.
• Cumulative Volume in both S&P 500 and S&P Emini futures contract has remained in synch with pricing since October low, but neither issue on longer term and since May 2011 high has performed as well index pricing.

Market Overview – What We Think:

• Major resistance appears to be having ongoing effect of stock market, as measured by S&P 500 index.
• As a consequence, until S&P 500 can break above short-term high at 1292.66 to re-assert Intermediate Cycle uptrend begun after October lows, staying power of short-term uptrend remains in doubt.
• There is also developing issue in that moderately “Overbought” short-term readings have begun to develop across indicator spectrum.
• Given lingering resistance market may simply fail to overcome major resistance up to 1370.58 level and Intermediate Cycle top is created somewhere this side of there. Scenario would feed into possibility all price strength since October lows has been bear market retracement.
• If more gains follow, however, and 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.

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