Market bounces, but resistance has not evaporated

Market Snapshot for session ending 12-20-11:

 

Last

Day Change

%Change

S&P 500 Index

1241.30

+35.95

+2.98%

Dow Jones Industrials

12103.58

+337.32

+2.87%

NASDAQ Composite

2603.73

+80.59

+3.19%

Value Line Arithmetic Index

2665.52

+95.00

+3.70%

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

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

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

Market Overview – What We Know:

  • Sharp gains Tuesday developed just above rising intermediate-term uptrend line connecting October and November short-term lows and lower edge of 10-Week Intermediate Cycle Price Channel at 1188.87.
  • Minor Cycle remains negative, but buying above upper edge of 10-Day Price Channel at 1252.55 would likely reverse short-term trend to positive if strength above December 7 intraday and short-term high at 1267.06 also follows.
  • Nothing but strength back above October 27 short-term high would re-assert Intermediate Cycle positive initiated after October 4 low (1074.77).
  • Reversing 13 days of net negativity, CPFL was positive by 1.86 to 1. Indicator nonetheless remains in Intermediate Cycle downtrend after reaching new lows Monday and worst levels since February 25, 2011.
  • CPFL has confirmed none of net advance in market since October lows and continues to suggest internal market negativity as measured by options buyers is weak.
  • Most Actives Advance/Decline Line (MAAD) was positive Tuesday and posted a 19 to 1 positive reading after tapping rising uptrend line connecting October and November short-term lows. MAAD Daily Ratio was last toward “Neutral.”
Index Daily/Weekly/Monthly Stops Weekly Monthly
12/19 12/20 12/21 12/22 12/23 12/23 12/31

S&P 500
Index

BUY
1259.14

BUY
1258.46

BUY
1252.55

BUY
1247.01

BUY
1242.92

BUY
1188.87

BUY
1337.19

Dow Jones
Industrials

BUY
12178.50

BUY
12184.82

BUY
12145.69

BUY
12111.53

BUY
12079.16

BUY
11390.28

BUY
12488.49

NASDAQ
Composite

BUY
2645.93

BUY
2646.37

BUY
2632.08

BUY
2618.27

BUY
2609.29

BUY
2540.32

BUY
2824.47

Value Line
Index

BUY
2720.72

BUY
2718.93

BUY
2699.00

BUY
2681.65

BUY
2671.83

BUY
2546.90

BUY
3062.69

Market Overview – What We Think:

  • Finding buyers just above rising Intermediate Cycle uptrend line and 10-Week Price Channel low, strength Tuesday gave bulls another reprieve.
  • Upside follow-through above upper edge of 10-Day Price Channel at 1252.55—S&P 500 and then December 7 intraday high at 1267.06 would be necessary to put index in position to seriously challenge October 27 short-term high at 1292.66, the point which must be surpassed to re-assert Intermediate Cycle uptrend.
  • But yet another upside failure in face of developing “Rising Wedge” chart formation under construction since October lows, a negatively biased pattern, would suggest all price action since October 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 could mean time is wasting for bullish cause.

Click charts to enlarge

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