Market recovers, but volume abnormally light

Market Snapshot for session ending 12-29-11:

Market Overview – What We Know:

• Market recovers Thursday majority of loss suffered Wednesday to keep short-term trend positive within context of still positive Intermediate Cycle.
• Trading volume remains abnormally light and was running at about 50% of normal levels.
• Short-term trend remains positive until 1226.23 (Friday) until lower edge of 10-Day Price Channel while Intermediate Cycle remains positive this week until 1187.25 at lower edge of 10-Week Price Channel.
• S&P 500 must better 1292.66 at October 27 high to re-assert Intermediate Cycle uptrend begun after October lows.
• MAAD recovered all of Wednesday’s loss less I issue Thursday, but MAAD Daily Ratio has begun moving back toward moderately “Overbought” territory.
• CPFL was positive Thursday by 1.20 to 1, but on longer-term basis, CPFL has remained consistently negative since February 2011 and could make new lows with ease.

Market Overview – What We Think:

• Market’s modest recovery Thursday notwithstanding, price action has nonetheless faded each time price obstacles have appeared.
• We continue to think market internals do not justify substantially higher prices even though short-term trend remains positive along with Intermediate Cycle. It remains to be seen if strength can be sustained.
• S&P 500 continues to confront 100 points of major resistance which must be overcome to make new highs. That is a very tall order since that resistance band has been an impediment for the past eight months.
• We suspect intermediate-term rally will fade somewhere this side of 1370.58 and that bearish case will prevail on the longer term.
• Ongoing development and maturation of potential ascending wedge chart pattern developing since October lows is suggestion all strength since October could ultimately prove to be reflex rally in bear market.
• None of our key indicators including CPFL, MAAD, CV, or Momentum looks as if it will confirm index prices to new highs even if such price action is possible.

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