Stock market stalls as overbought levels persist

Market Snapshot for session ending 1-24-12:

 

Last

Day Change

%Change

S&P 500 Index

1314.65

-1.35

-.10%

Dow Jones Industrials

12675.80

-32.99

-.26%

NASDAQ Composite

2786.64

+2.47

+.09%

Value Line Arithmetic Index

2887.47

+11.40

+.40%

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 were mixed again Tuesday with S&P 500 and Dow 30 off fractionally with NASDAQ and Value Line index up a bit.
  • Short and intermediate-term cycles remain positive, but “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.
  • Cumulative Volume (CV) in S&P 500 remains above later October resistance high after breaking above plot resistance January 18, but CV in S&P Emini has yet to follow suit.
  • Key statistical resistance in S&P holds at upper edge of 10-Month Price Channel at 1336.70.
  • Daily MAAD stalled with market Tuesday, but was last only 28 issues from equaling its March 3, 2011 high, a level equal to index pricing last May when S&P 500 hit 1370.58. Weekly MAAD remains nearly 47% below 2011 highs and is not positioned to better its 2011 highs anytime soon.
  • Daily CPFL was positive Tuesday, but indicator continues to substantially lag broad market strength having failed to confirm any of strength since October lows.
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:

  • We’re repeating ourselves, but biggest question now hovering over market is “how close to an endgame is rally that began in early October and will new highs follow before rally is over?”
  • Given hesitation over past few sessions, short-term “Overbought” conditions and lingering resistance, we would not be surprised to see Minor Cycle begin heading lower soon.
  • We continue to think major resistance will prevail, but it wouldn’t be first time a sharp downside break (May-October) was followed by movement to a new high. Think July 2007 (1555.10--S&P 500), a brief correction, and then a short-term rally to a new high in October 2007 high (1576.09). Then came second worst bear in stock market history.
  • When 10-day Price Channel is inevitably broken (1283.20--Wednesday), extent to which selling then develops will determine staying power of larger Intermediate Cycle in effect since October lows.

Click charts to enlarge

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