S&P 500 recovers some, but faces resistance

Market Snapshot for session ending 2-1-12:

Market Overview – What We Know:

• Good gains in major indexes Wednesday pushed prices back toward best bids of short-term rally (1333.47—S&P 500), levels which must be overcome to re-assert Minor Cycle advance..
• Short and Intermediate-term trends remain positive, but “Overbought.”
• Selling in S&P 500 below lower edge of 10-Day Price Channel (1305.34—Thursday) would suggest beginning of end of Minor Cycle advance underway since mid-December.
• Short-term Momentum in S&P 500 remains slightly positive and has failed to confirm any of strength in index since December 19 lows. Indicator could fall into negative territory with ease.
• Cumulative Volume (CV) in S&P 500 remains above late October resistance highs, but S&P Emini CV has yet to break above late October resistance.
• Daily MAAD was positive Wednesday with 19 issues higher and 1 down. Indicator needs to better January 25 peak to create new short-term high.
• Daily CPFL was positive Wednesday by 1.80 to 1, but has confirmed none of strength since October lows and remains well below February 2011 indicator highs.

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. Wednesday’s strength erased a large part of pullback since then, but it remains to be seen if a new short to intermediate term high will follow.
• First serious negativity on Minor Cycle would come with break below 10-Day Price Channel (1305.34—Thursday) and could set stage up for challenge to Intermediate Cycle uptrend underway since October lows.
• 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 diminishing.

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