Stocks negative short-term; Intermediate Cycle threatened

Market Snapshot for session ending 12-14-11:

Market Overview – What We Know:

• Further market losses Wednesday not only confirmed short-term reversal to negative, but selling brought S&P 500 within range of lower edge of 10-Week Price Channel that is coincident with rising uptrend line connecting October and November lows (1180—S&P 500).
• Prices now remain locked between that uptrend line (1180) and October 27 high (1292.66—S&P 500) and point which must be exceeded on upside to re-assert Intermediate Cycle advance begun after October lows.
• Upside failure would simply amplify inability of market to overcome major resistance stretching from October high up to May price peaks (1370.58—S&P) and point that would have to be exceeded to re-assert Major Cycle advance.
• More selling Wednesday caused Call/Put Dollar Value Flow Line (CPFL) to decline to lowest level indicator has seen since February 25, 2011. CPFL has confirmed none of on-balance market strength since October lows.
• Most Actives Advance/Decline Line (MAAD) was negative again Wednesday and has moved within range of fracturing uptrend line connecting October and November reaction lows.
• MAAD Daily Ratio has moved back to moderately “Oversold” levels. 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 remains somewhat weaker than index pricing as measured by S&P 500.

Market Overview – What We Think:

• With reversal to negativity on Minor Cycle Wednesday, lingering positive flavor of larger Intermediate Cycle is rapidly fading.
• Much more selling and S&P 500 prices would be positioned to fracture uptrend line connecting October and November short-term reaction lows near 1180. Level also coincides with lower edge of 10-Week Price Channel which must hold to keep Intermediate Cycle viable.
• Downside break below 1180—S&P 500 would be suggestion all price action since October lows has be countertrend bounce within context of larger cycle negative.
• If selling diminishes and 1180 level holds, short-term rebound could follow, but then resistance becomes problematic once again and October 27 peak at 1292.66 would come into view once again.
• In meantime, inability of broad market, as measured by S&P 500 index, to overcome major resistance stretching up to 1370.58—S&P means time is wasting for bullish cause which may already be lost.
• If market simply fails in negative price and indicator environment, scenario would suggest all price strength since October lows has been nothing but bear market retracement.

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