Stock market stalls as Minor Cycle looks tired

Market Snapshot for session ending 1-23-12:

 

Last

Day Change

%Change

S&P 500 Index

1316.00

+.62

+.05%

Dow Jones Industrials

12708.82

-11.66

-.09%

NASDAQ Composite

2784.17

-2.53

-.09%

Value Line Arithmetic Index

2876.06

-.29

-.01%

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:

  • Market closed mixed Monday with S&P fractionally higher while Dow 30, NASDAQ and Value Line were fractionally lower.
  • Short and intermediate-term cycles remain positive, but both are also “Overbought.”
    Major Cycle remains near “Neutral.”
  • Short-term Momentum in S&P 500 has failed to confirm any of strength in index since December 19 lows.
  • Key statistical resistance in S&P holds at 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 surpassed.
  • Cumulative Volume (CV) in S&P 500 remains above later October resistance high after breaking above plot resistance last Wednesday, but CV in S&P Emini has yet to follow suit.
  • Daily MAAD reached another short-term high Monday and was last only 26 issues from equaling its March 3, 2011 high, a level equal to index pricing last May when S&P 500 hit 1370.58. But weekly MAAD remains nearly 47% below 2011 highs and does not look “eager” to confirm positive daily MAAD movement.
  • Daily CPFL was negative Monday for first time in eight sessions.
Index Daily / Weekly / Monthly Stops Weekly Monthly
1/23 1/24 1/25 1/26 1/27 1/27 1/31

S&P 500
Index

SELL
1277.29

SELL
1280.47

SELL
1283.20

SELL
1288.45

SELL
1293.17

SELL
1201.03

BUY
1336.70

Dow Jones
Industrials

SELL
12345.56

SELL
12364.08

SELL
12384.26

SELL
12420.29

SELL
12462.60

SELL
11637.37

BUY
12500.72

NASDAQ
Composite

SELL
2675.00

SELL
2686.12

SELL
2696.76

SELL
2714.37

SELL
2729.01

SELL
2539.02

BUY
2829.75

Value Line
Index

SELL
2750.85

SELL
2761.93

SELL
2771.73

SELL
2789.39

SELL
2806.96

SELL
2570.73

BUY
3054.65

Market Overview – What We Think:

  • Biggest question now hovering over market is “how close to an endgame is the rally that began in early October and will new highs follow before rally is over?”
  • We continue to think major resistance will prevail, but it wouldn’t be first time a sharp downside break (May-October) was followed by steady movement to a new high. Think July 2007 (1555.10--S&P 500) that was followed by October 2007 high (1576.09) and second worst bear market in stock market history.
  • While our first upside target in S&P 500 at 1310.77 has been exceeded and short-term Momentum has confirmed none of rally since December 19, it is probably only matter of time before short-term “Overbought” condition begins to bite.
  • When 10-day Price Channel is inevitably broken (1280.47--Tuesday), extent to which selling then develops will determine staying power of larger Intermediate Cycle in effect since October lows.
  • Any upside failure that occurs before new highs are reached would accrue to benefit of bears on longer term.

Click charts to enlarge

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