Traders wait as S&P hovers below short-term high

Market Snapshot for session ending 2-2-12:

Market Overview – What We Know:

• Major indexes closed mixed Thursday. The Dow Jones Industrial Average was slightly negative while S&P 500, NASDAQ, and Value Line index were a little positive.
• Short and Intermediate-term trends remain positive, but “Overbought.”
• Selling in S&P 500 below lower edge of 10-Day Price Channel (1307.49—Friday) 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 easily fall into negative territory.
• Cumulative Volume (CV) in S&P 500 remains above late October resistance highs, but S&P Emini CV has yet to break above same late October resistance.
• Daily MAAD was positive Thursday with 11 issues positive and 4 lower. Added strength in MAAD pushed indicator on Minor Cycle to new short-term high.
• Daily CPFL was positive Thursday for eighth session in row (1.95 to 1) but has confirmed none of strength since October lows.

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 and confirmed negativity on Minor Cycle would come with break below 10-Day Price Channel (1307.49—S&P 500) 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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