Stock buyers positioned for upside threat, but...

Market Snapshot for session ending 12-21-11:

Market Overview – What We Know:

• Index prices, except NASDAQ, tacked on small gains Wednesday, but Minor Cycle remains negative.
• Pre-holiday trading remains below average.
• Buying in S&P 500 above upper edge of 10-Day Price Channel (1247.01—Thursday) would suggest beginning of end to corrective action that has persisted for past several days.
• Nothing but buying above October 27 intraday and short-term high at 1292.66—S&P 500 would re-assert Intermediate Cycle advance begun after October lows.
• CPFL was positive for second session in row Wednesday with Call/Put Dollar Value Ratio positive by 1.98 to 1.
• But CPFL has confirmed none of net advance in market since October lows and continues to suggest longer-term internal market weakness as measured by options buyers.
• Most Actives Advance/Decline Line (MAAD) was marginally positive Wednesday with 13 issues up and 7 down. Daily MAAD remains marginally above uptrend line connecting October and November lows. MAAD Daily Ratio remains near “Neutral.”

Market Overview – What We Think:

• So long as S&P 500 remains stuck below two-month-old downtrend line connecting late October high (1292.66) and December 7 short-term high (1267.06), we must presume sellers will continue to maintain upper hand.
• But if first downtrend line and then October resistance are overcome, we would have to presume buyers might be able to take another stab at major resistance stretching up toward May high at 1370.58—S&P 500.
• If short-term buying proves once again that bulls do not have the power to force prices higher in face of solid resistance, we would view weakness below an intermediate uptrend line at 1190 and lower edge of 10-Week Price Channel at 1188.87 as yet another clear sign bears are winning supply/demand battle.
• Weakness below rising uptrend of progressively defined “Rising Wedge” chart formation developing since October lows, would suggest all price action since October has been countertrend bounce within context of larger cycle negative.

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