Failing momentum, major resistance still face market

Market Snapshot for session ending 1-5-12:

 

Last

Day Change

%Change

S&P 500 Index

1281.06

+3.76

+.29%

Dow Jones Industrials

12415.70

-2.79

-.02%

NASDAQ Composite

2669.86

+21.49

+.81%

Value Line Arithmetic Index

2743.35

+13.86

+.51%

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

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

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

Market Overview – What We Know:

  • Further lackluster market action was reflected in major indexes Thursday. S&P 500, NASDAQ, and Value Line Index gained fractional percentages while Dow Jones 30 lost a bit.
  • Trading volume in S&P 500 increased nearly 20% vs. Wednesday’s action.
  • Short-term trend continues to lose momentum in face of major resistance, but so long as short and intermediate term cycles remain positive, further gains cannot be precluded.
  • S&P must better May 2011 high at 1370.58 to re-assert Major Cycle uptrend.
  • MAAD was positive Wednesday by 16 to 4 and was last positioned to better indicator resistance at level equivalent to late October short-term resistance high in S&P 500 at 1292.66.
  • CPFL was slightly positive Thursday by 2.81 to 1, but indicator continues to hold not far above new lows made October 19. CPFL has confirmed virtually none of market’s strength since October lows.
Index Daily / Weekly / Monthly Stops Weekly Monthly
1/2 1/3 1/4 1/5 1/6 1/6 1/31

S&P 500
Index

SELL
1226.23

SELL
1233.58

SELL
1237.81

SELL
1241.71

SELL
1246.28

SELL
1185.22

BUY
1336.70

Dow Jones
Industrials

SELL
11944.71

SELL
12010.95

SELL
12047.60

SELL
12082.13

SELL
12121.22

SELL
11404.48

BUY
12500.72

NASDAQ
Composite

SELL
2561.12

SELL
2570.69

SELL
2575.55

SELL
2581.21

SELL
2587.74

SELL
2530.52

BUY
2829.75

Value Line
Index

SELL
2627.00

SELL
2642.98

SELL
2651.35

SELL
2658.92

SELL
2669.31

SELL
2536.46

BUY
3054.65

Market Overview – What We Think:

  • Clock continues to tick on short-term advance begun after December 19 lows (1202.37—S&P 500) and trend that must result in strength above October 27 high at 1292.66—S&P to re-assert Intermediate Cycle advance.
  • Continuing upside failure could ultimately cause trend to turn negative of its own weight.
  • All of major indexes (S&P 500, Dow 30, NASDAQ, and Value Line) have one thing in common in that all have stalled at “Neckline” of Head and Shoulders top initiated early last year. Pattern led to sharp losses last August and indexes have never fully recovered from that downtrend. What was then support broken on downside is now resistance on upside.
  • Ongoing failure in face of major resistance in market that keeps inching toward “Overbought” territory is not a sign of trend health.
  • Possible “ascending wedge” pattern with bearish implications under development since October lows is maturing and may not have much life left.
  • Upside profit targets for S&P 500 at 1310.77 and 1376.55 come into view via measured moves from October lows with likelihood S&P 500 could stall anywhere this side of upper edge of 10-month Price Channel at 1336.70.
  • Odds are good that even if market is somehow able to reach new highs, none of our key indicators will confirm price strength to suggest staying power of rally could be highly suspect and could turn out to be classic ‘draw play” for unwary buyers.

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