Coil tightens as ‘overbought’ S&P stretches higher

Market Snapshot for session ending 1-19-12:

 

Last

Day Change

%Change

S&P 500 Index

1314.50

+6.46

+.49%

Dow Jones Industrials

12623.98

+45.02

+.36%

NASDAQ Composite

2788.33

+18.62

+.67%

Value Line Arithmetic Index

2871.01

+19.73

+.69%

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:

  • Major indexes posted further gains Thursday.
  • Short and intermediate-term cycles remain positive.
  • S&P has exceeded first upside target at 1310.77 via Thursday’s closing level at 1314.50.
  • Next upside target is upper edge of 10-Month Price Channel at 1336.70. If that level is surpassed odds would substantially increase that May 2011 high at 1370.58 could be seriously challenged.
  • Cumulative Volume (CV) in S&P 500 remains above later October resistance high, but CV in S&P Emini has yet to follow suit (see CV charts)
  • Short-term cycle remains “Overbought” and Minor Cycle Momentum has confirmed none of short-term advance following December 19 short-term lows.
  • So long as S&P 500 holds above lower edge of 10-day Price Channel (1277.20, Friday), short-term trend will remain positive. Same for intermediate-term trend until 1200.20.
  • Daily MAAD reached another short-term high Thursday, remains in synch with broad market, and has recovered more than three fourths of its losses since last May. If weekly MAAD has another good week this week and maximizes on upside, indicator will have recovered about two thirds of its losses since last May, but weekly MAAD is not as close to May 2011 highs as is daily MAAD.
  • Daily CPFL has begun to show some renewed life lately, but indicator remains anemic on Intermediate Cycle.
Index Daily / Weekly / Monthly Stops Weekly Monthly
1/16 1/17 1/18 1/19 1/20 1/20 1/31

S&P 500
Index

SELL
1264.88

SELL
1268.43

SELL
1272.34

SELL
1275.90

SELL
1277.29

SELL
1200.20

BUY
1336.70

Dow Jones
Industrials

SELL
12274.49

SELL
12301.59

SELL
12325.43

SELL
12344.38

SELL
12345.56

SELL
11600.84

BUY
12500.72

NASDAQ
Composite

SELL
2633.25

SELL
2646.44

SELL
2657.27

SELL
2667.84

SELL
2675.00

SELL
2545.00

BUY
2829.75

Value Line
Index

SELL
2705.13

SELL
2714.57

SELL
2727.74

SELL
2741.26

SELL
2750.65

SELL
2569.45

BUY
3054.65

Market Overview – What We Think:

  • Persistent strength on short to intermediate-term cycles has caused us to temper our negative outlook somewhat, given price gains, fact daily MAAD continues to improve, and CV in S&P 500 finally lifted itself above resistance created last October.
  • While our first upside target in S&P 500 at 1310.77 has been exceeded, short-term Momentum has confirmed none of rally since December 19. Since market is now short-term “Overbought,” bigger question becomes how much longer can this rally last before more profit-taking develops. Or at least before Minor Cycle reverts to negative.
  • Volume in S&P 500 remains substandard. Best volume days now are roughly equal to worst volume days a year ago.
  • When 10-day Price Channel is inevitably broken (1277.29, Friday), extent to which selling develops thereafter will determine staying power of larger Intermediate Cycle in effect since October lows.
  • As we have said repeatedly, any upside failure that occurs before new highs are reached would accrue to benefit of bears.

Click charts to enlarge

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