Recent low volume rally haunts market on Wednesday

Market Snapshot for session ending 12-28-11:

 

Last

Day Change

%Change

S&P 500 Index

1249.64

-15.79

-1.25%

Dow Jones Industrials

12151.41

-139.93

-1.14%

NASDAQ Composite

2589.98

-35.22

-1.34%

Value Line Arithmetic Index

2669.58

-49.82

-1.83%

Minor Cycle
(Short-term trend lasting days to a few weeks)
Positive / Neutral

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:

  • Recent low volume strength came back to haunt the market Wednesday with all of major indexes posting sharp losses. Overall volume remains low into holiday week.
  • Short-term trend remains positive until 1220.04 (Thursday) until lower edge of 10-Day Price Channel.
  • Intermediate Cycle remains positive this week until 1187.25 at lower edge of 10-Week Price Channel.
  • S&P 500, that tends to represent broad market, must better 1292.66 at October 27 high to re-assert Intermediate Cycle advance begun after October lows.
  • MAAD was 100% negative Wednesday with 20 issues down and none up. If MAAD posts another sharp down day it will sink below uptrend line connecting October and November reaction lows. Such action would suggest an end to advance since October.
  • MAAD Daily Ratio was last near “Neutral.”
  • CPFL was negative Wednesday for second session in row with a sell ratio of 1.62 to 1. On longer-term basis, CPFL has remained consistently negative since February 2011 and could make new lows with ease.
  • Cumulative Volume has remained in synch with broad market since October lows, but indicator continues to highlight negative volume bias market suffered via selling August selling.
Index Daily/Weekly/Monthly Stops Weekly Monthly
12/26 12/27 12/28 12/29 12/30 12/30 12/31

S&P 500
Index

SELL
1217.30

SELL
1213.80

SELL
1215.49

SELL
1220.04

SELL
1226.23

SELL
1187.25

BUY
1337.19

Dow Jones
Industrials

SELL
11855.30

SELL
11829.45

SELL
11851.12

SELL
11893.52

SELL
11944.71

SELL
11401.03

BUY
12488.49

NASDAQ
Composite

SELL
2554.71

SELL
2553.48

SELL
2549.53

SELL
2553.60

SELL
2561.12

SELL
2529.43

BUY
2824.47

Value Line
Index

SELL
2603.96

SELL
2594.07

SELL
2598.04

SELL
2610.46

SELL
2627.00

SELL
2541.41

BUY
3062.69

Market Overview – What We Think:

  • Whether its trendline or price resistance, market continues to underscore weak underpinnings by fading each time obstacles appear. Wednesday’s selling underlined that assumption.
  • We continue to think market underpinnings are not solid even though short-term trend remains positive along with Intermediate Cycle which was infused with some new life last week. It remains to be seen if that heartbeat can be sustained.
  • S&P 500 still has100 points of major resistance to overcome before new highs could result. That is a very tall order since that resistance band remains as an impediment after nearly eight months of upside attempts by bulls.
  • We suspect short- to intermediate-term rally will fade somewhere this side of 1370.58 and that bearish case will prevail.
  • Ongoing development and maturation of potential ascending wedge chart pattern since inception after October lows is suggestion all strength since October could ultimately prove to be reflex rally in wake of bear market top made last May with wide range of sellers eager to break even all way to 1370.58—S&P 500.
  • None of our key indicators including CPFL, MAAD, CV, or Momentum looks as if it will confirm higher index prices.

Click charts to enlarge

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