New indicator low amplifies stock market losses

Market Snapshot for session ending 12-12-11:

 

Last

Day Change

%Change

S&P 500 Index

1236.47

-18.71

-1.49%

Dow Jones Industrials

12021.39

-162.86

-1.34%

NASDAQ Composite

2612.26

-34.59

-1.31%

Value Line Arithmetic Index

2668.49

-43.09

-1.59%

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:

  • Yet again, in face of major resistance and 200-Day Moving Average, S&P 500 index sold sharply lower Monday.
  • At same time, new weakness has put S&P within range of lower edge of 10-Day Price Channel (1220.17) that will act as downside support and which must hold if short-term cycle is to remain viable.
  • Monday’s selling was also notable because net negativity by options players pushed our Call/Put Dollar Value Flow Line (CPFL) below October 17 intermediate-term lows to a new low. That weakness highlights continuing weakness of market internals.
  • CPFL has confirmed none of rally since October lows.
  • Minor Cycle remains positive, but S&P 500 must better October 27 intraday and short-term high (1292.66) to re-assert larger and still positive Intermediate Cycle advance begun after October lows.
  • Major resistance looms from current levels up to May highs (1370.58—S&P 500) and must be overcome to suggest resumption of Major Cycle bull trend begun in March 2009.
  • MAAD Daily Ratio moved back toward “Neutral” levels via Monday’s weakness while MAAD Weekly Ratio is moderately “Overbought.” MAAD on longer term cycle remains close to major cycle low created in March 2009.
  • Cumulative Volume in both S&P 500 and S&P Emini futures contract has remained in synch with pricing since October, but CV in neither issue on longer term and since May 2011 high has performed as well as index pricing.
Index Daily/Weekly/Monthly Stops Weekly Monthly
12/12 12/13 12/14 12/15 12/16 12/16 12/31

S&P 500
Index

SELL
1209.80

SELL
1220.17

SELL
1227.78

SELL
1231.81

SELL
1235.12

SELL
1180.00

BUY
1337.19

Dow Jones
Industrials

SELL
11695.90

SELL
11788.23

SELL
11866.28

SELL
11915.81

SELL
11957.78

SELL
11285.14

BUY
12488.49

NASDAQ
Composite

SELL
2568.09

SELL
2588.51

SELL
2597.63

SELL
2603.00

SELL
2607.89

SELL
2525.59

BUY
2824.47

Value Line
Index

SELL
2597.16

SELL
2622.27

SELL
2640.29

SELL
2648.91

SELL
2655.33

SELL
2520.12

BUY
3062.69

Market Overview – What We Think:

  • After several sessions of net lateral action, Monday’s break to downside in face of major resistance and movement to new lows by CPFL has once again damaged bullish case.
  • If lower edge of 10-Day Price Channel (1220.17) is fractured (see table above), odds would increase that short-term advance begun after November 25 low are over. Such a reversal would also have effect on larger Intermediate Cycle which remains currently positive.
  • Inability of broad market, as measured by S&P 500 index, to overcome major resistance stretching up to 1370.58—S&P means that time continues to waste. As indexes find it increasingly difficult to surmount resistance, strategic ability to “overcome” is diminished by each upside failure.
  • While larger Intermediate Cycle remains positive, if market simply fails as Intermediate Cycle peaks this side of 1370.58—S&P 500, scenario would suggest all price strength since October lows has been nothing but bear market retracement.

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