Market looks wobbly as profit-taking picks up

Market Snapshot for session ending 1-30-12:

 

Last

Day Change

%Change

S&P 500 Index

1313.01

-3.32

-.25%

Dow Jones Industrials

12653.72

-6.74

-.05%

NASDAQ Composite

2811.94

-4.61

-.16%

Value Line Arithmetic Index

2896.96

-19.54

-.67%

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 lost fractionally Monday into what cold turn out to be short-term top.
  • Short and intermediate-term cycles remain positive and “Overbought.”
  • S&P 500 must rally above January 26 intraday high (1333.47) to re-assert Minor Cycle advance begun after December 19 short-term low (1202.37).
  • Short-term Momentum in S&P 500 has failed to confirm any of strength in index since December 19 lows and could slip into negative territory with relative ease. Intermediate Cycle Momentum has confirmed none of advance since late December.
  • Cumulative Volume (CV) in S&P 500, although positive, faded with prices Monday, while S&P Emini CV has yet to break above late October resistance and continues to reflect lack of commitment by futures contract buyers.
  • Key statistical resistance in S&P holds at upper edge of 10-Month Price Channel at 1319.38 (February level).
  • Daily MAAD reached short-term high last Wednesday and was 36 issues from equaling its March 2011 high.
  • Daily CPFL was positive Monday by 1.45 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
1/30 1/31 2/1 2/2 2/3 2/3 2/29

S&P 500
Index

SELL
1297.23

SELL
1299.92

SELL
1302.33

SELL
1305.34

SELL
1307.49

SELL
1209.43

BUY
1319.38

Dow Jones
Industrials

SELL
12506.98

SELL
12535.79

SELL
12553.44

SELL
12588.63

SELL
12606.72

SELL
11736.06

SELL
11481.71

NASDAQ
Composite

SELL
2739.93

SELL
2748.19

SELL
2758.69

SELL
2768.52

SELL
2776.91

SELL
2545.58

BUY
2802.16

Value Line
Index

SELL
2820.60

SELL
2829.91

SELL
2841.05

SELL
2853.65

SELL
2864.17

SELL
2587.41

BUY
2997.55

Market Overview – What We Think:

  • Time is likely running out on short-term rally begun after December 19 lows (1202.37—S&P 500). Last Thursday’s intraday high at 1333.47—S&P 500 could prove to be best level of month-old rally.
  • Short-term reversal near current levels would then affect larger Intermediate Cycle that is also beginning to look mature.
  • Short-term reversal would mean that no new highs had been reached in any of major indexes.
  • If we are correct that all of uptrend since October lows has been a “return action rally” following the creation of a major high in May 2011 (1370.58—S&P 500), then a retracement of all gains since October could quickly follow.
  • To suggest Minor Cycle negative, however, S&P must first decline below lower edge of 10-Day Price Channel (1299.92—Tuesday). Monday S&P came within 3.26 points of hitting Monday’s Price Channel low at 1297.23. Lower edge of Intermediate Cycle Price Channel was last plotted at 1209.43.
  • If short-term advance persists, major resistance is overcome, and new highs follow, it wouldn’t be first time sharp downside break (May-October) was followed by movement to new high. Think July 2007 (1555.10--S&P 500), when brief correction developed, and then short-term rally to new high in October 2007 high (1576.09) occurred. Then followed second worst bear in stock market history.

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