Stocks negative short-term; Intermediate Cycle threatened

Market Snapshot for session ending 12-14-11:

 

Last

Day Change

%Change

S&P 500 Index

1211.82

-13.91

-1.13%

Dow Jones Industrials

11823.48

-131.46

-1.10%

NASDAQ Composite

2539.31

-39.96

-1.55%

Value Line Arithmetic Index

2581.34

-38.44

-1.47%

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

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

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

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.
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:

  • 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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