Stock market increasingly vulnerable to more selling

Market Snapshot for session ending 1-31-12:

 

Last

Day Change

%Change

S&P 500 Index

1312.41

-.60

-.05%

Dow Jones Industrials

12632.91

-20.80

-.16%

NASDAQ Composite

2813.84

+1.90

+.07%

Value Line Arithmetic Index

2893.21

-3.75

-.13%

Minor Cycle
(Short-term trend lasting days to a few weeks)
Positive / Neutral

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:

  • Mixed readings were generated by major indexes Tuesday with S&P 500, Dow 30, and Value Line index off slightly and NASDAQ Composite ahead fractionally.
  • Short and Intermediate-term trends remain positive, but “Overbought.”
  • Selling in S&P 500 below lower edge of 10-Day Price Channel (1302.33—Wednesday) would suggest beginning of end of Minor Cycle advance underway since mid-December.
  • S&P 500 must rally above January 26 intraday high (1333.47) to re-assert Minor Cycle uptrend.
  • 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 ease. Intermediate Cycle Momentum has confirmed none of advance since late December.
  • Cumulative Volume (CV) in S&P 500 has pulled back with prices over past few days, but remains above late October resistance highs. S&P Emini CV, however, 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 was neutral Tuesday with 10 issues up and 10 down and remains 36 issues from equaling March 3, 2011 high.
  • Daily CPFL was positive Monday by 1.12 to 1, but remains well below February 2011 indicator highs. CPFL 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:

  • Last Thursday’s intraday high at 1333.47—S&P 500 was probably peak of Minor Cycle rally that began over month ago.
  • Extent to which short-term trend weakens will determine staying power of larger Intermediate Cycle.
  • First serious negativity on Minor Cycle would come with break below 10-Day Price Channel (1302.33—Wednesday) and could set stage up for serious challenge to Intermediate Cycle uptrend in effect since October lows.
  • Short-term reversal to negative 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), a retracement of all gains since October could quickly follow.
  • Given proximity of pricing to last May’s highs and fact Minor Cycle has yet to turn negative, we cannot preclude additional upside attempts even though the odds of a continuance of short and intermediate-term rally are rapidly diminishing.

Click charts to enlarge

Next page: Indicator review

Page 1 of 2 >>
Comments
comments powered by Disqus