S&P sinks again toward trendline, statistical support

Market Snapshot for session ending 12-19-11:

Market Overview – What We Know:

• Further losses in major indexes Monday solidified Minor Cycle negative while further threatening tentatively positive Intermediate Cycle.
• Lower edge of 10-Week Price Channel comes under serious threat at 1188.87 for balance of week while defined uptrend line connecting October 4 (1074.77—S&P 500) and November 25 (1158.66—S&P 500) short-term lows is threatened toward 1185—S&P 500.
• Downside break below 10-Week Price Channel and intermediate uptrend line would suggest end to market retracement since October lows.
• Underscoring market vulnerability, our Call/Put Dollar Value Flow Line (CPFL) sank to new Intermediate Cycle low Monday on negative ratio of 2.45 to 1.
• CPFL has confirmed none of net advance in market since October lows and continues to suggest internal market negativity as measured by options buyers.
• Most Actives Advance/Decline Line (MAAD) was net negative Monday with 3 issues up and 17 down. Weakness last placed MAAD plot at uptrend line connecting October and November short-term lows. MAAD Daily Ratio has moved back toward “Oversold” territory.
• Cumulative Volume (CV) in S&P 500 and S&P Emini futures contract remains S&P sensitive, but CV in neither issue on long-term trend looks healthy based on volume stats.

Market Overview – What We Think:

• Monday’s selling in broad market as measured by S&P 500 moved index a step closer to downside “failsafe” levels on larger Intermediate Cycle that must hold if Major Cycle is to remain positive.
• Until rising uptrend line connecting October and November lows is fractured (1185—S&P 500) and 10-week Price Channel (1188.87) is decisively penetrated, we cannot rule out possibility currently developing short-term “oversold” conditions could lead to yet another upside attempt after stability is found toward intermediate trendline and 10-week Price Channel low.
• To suggest resumption of Intermediate Cycle positive, however, S&P must rally back above October 27 high (1292.66), but must first rise above December 7 intraday high (1267.06).
• Yet another upside failure in face of developing “Rising Wedge” chart formation, a negatively biased pattern, would suggest all price action since October lows has been countertrend bounce within context of larger cycle negative.
• 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.
• While there are some who believe price action since May will prove to be merely a pullback in primary bull market, time may be running out on that strategy.

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