Market stalls as short-term overbought readings loom

Market Snapshot for session ending 1-26-12:

 

Last

Day Change

%Change

S&P 500 Index

1318.43

-7.62

-.57%

Dow Jones Industrials

12734.63

-22.33

-.18%

NASDAQ Composite

2805.28

-13.03

-.46%

Value Line Arithmetic Index

2902.88

-14.26

-.49%

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 suffered marginal losses Thursday on marginally somewhat higher trading volume.
  • Short and intermediate-term cycles remain positive, but “Overbought.”
  • Short-term Momentum in S&P 500 has failed to confirm any of strength in index since December 19 lows and could flip into negative territory with relative ease.
  • Cumulative Volume (CV) in S&P 500 has been trending with index lately, but has not recovered as much of loss since May highs as has index. S&P Emini CV has yet to break above late October resistance.
  • Key statistical resistance in S&P holds at upper edge of 10-Month Price Channel at 1336.70 and point that must contain strength if long-term trend is to remain negatively charged.
  • Daily MAAD fell back Thursday and was last 27 issues from equaling plot high made March 3, 2011. Weekly MAAD remains weaker than daily series.
  • Daily CPFL was positive Thursday by 1.02 to 1, but remains substantially below February 2011 indicator highs and has confirmed none 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:

  • Major resistance and short-term “Overbought” readings may finally be taking hold in S&P 500.
  • To suggest Minor Cycle negative, however, S&P must first decline below lower edge of 10-Day Price Channel (1293.17—Friday).
  • With short-term trend in “Overbought” territory, time is running out on this rally.
  • When 10-day Price Channel is inevitably broken, extent to which selling then develops will determine staying power of larger Intermediate Cycle which currently remains positive until lower edge of 10-Week Price Channel (1201.03) is fractured on downside.
  • If major resistance is overcome and new highs follow, 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 followed second worst bear in stock market history.

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