Thursday’s market drop jars uptrend in face of resistance

Market Snapshot for session ending 12-8-11:

 

Last

Day Change

%Change

S&P 500 Index

1234.35

-26.66

-2.11%

Dow Jones Industrials

11997.70

-198.67

-1.63%

NASDAQ Composite

2596.38

-52.83

-1.99%

Value Line Arithmetic Index

2645.19

-78.97

-2.90%

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

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

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

Market Overview – What We Know:

  • Sharp selling in major averages Thursday put dent in short-term advance begun after November 25 lows (1141.75—S&P 500).
  • Minor Cycle in S&P 500 remains positive, but prices must hold above lower edge of 10-Day Price Channel (1200.41) to keep trend positive.
  • Most Actives Advance/Decline Line (MAAD) was negative Thursday with 1 issue positive and 19 negative. MAAD remains generally in synch with market on short-term trend while MAAD Daily Ratio has moved into moderately “Overbought” territory.
  • 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 again Thursday for sixth session in row. Put Dollar Volume exceeded Call Dollar Volume by 1.25 to 1 with indicator holding not far above short-term low made back on October 17, the lowest point since CPFL peaked back on February 25.
  • CPFL has confirmed none of rally since October lows.
  • 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 as index pricing.
Index Dail/Weekly/Monthly Stops Weekly Monthly
12/5 12/6 12/7 12/8 12/9 12/9 12/31

S&P 500
Index

SELL
1182.12

SELL
1180.78

SELL
1181.34

SELL
1190.58

SELL
1200.41

SELL
1166.98

BUY
1337.19

Dow Jones
Industrials

SELL
11443.89

SELL
11429.53

SELL
11432.12

SELL
11518.28

SELL
11608.78

SELL
11159.44

BUY
12488.49

NASDAQ
Composite

SELL
2513.12

SELL
2505.85

SELL
2514.81

SELL
2529.77

SELL
2547.87

SELL
2502.16

BUY
2824.47

Value Line
Index

SELL
2535.34

SELL
2529.38

SELL
2527.93

SELL
2550.03

SELL
2573.86

SELL
2485.75

BUY
3062.69

Market Overview – What We Think:

  • Thursday’s pullback could prove to be mere bout of profit-taking in otherwise positive short-term advance begun after November 25 lows, but lacking strength by S&P 500 above October 27 intraday high at 1292.66, otherwise positive tone of trend is suspect.
  • There is also developing issue in that moderately “Overbought” short-term readings have begun to surface across indicator spectrum.
  • Given lingering resistance, market may simply fail to overcome major resistance up to 1370.58—S&P 500 and Intermediate Cycle top could be created somewhere this side of there. Scenario would suggest 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 is possible. Level would create a new high for move since March 2009 and would better May 2011 peak by several points.

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