Indexes, indicators mixed on market advance vs. 2011 highs

Market Snapshot for session ending 2-16-12:

Market Overview – What We Know:

• Major indexes posted modest gains Thursday.
• S&P 500 rallied to new short-term high, but remains below 5-2-11 peak at 1370.58. Dow Industrials did not make ne short-term high, but remain above 5-2-11 high. NASDAQ made new high and remains above 5-2-11 high. Value Line index rallied to new short-term high, but holds nearly 80 points below 5-2-11 high.
• Trading volume shrank by less than 2% in S&P 500 Thursday.
• Short and Intermediate-term trends remain “Overbought” based on S&P price, but MAAD Daily Ratio has moved lower from “Overbought” to “Neutral” and possible zone of opportunity on short-term trend.
• Weakness below lower edge of 10-Day Price Channel (1333.74—Friday) would suggest beginning of end of Minor Cycle trend in effect since December low (1202.37).
• Short-term Momentum in S&P 500 remains marginally positive, but could easily turn negative.
• Daily MAAD was positive Thursday by 19 to 1, but did not make a new short-term high with S&P 500. Indicator continues to hold below its February 8 short-term high.
• Cumulative Volume (CV) in both S&P 500 and S&P Emini futures contract made new short-term highs Thursday, but CV in both remains well below 2011 highs.
• Daily CPFL made new short-term high Thursday after breaking above late October resistance on Tuesday. Indicator remains substantially below 2-25-11 high.

Market Overview – What We Think:

• Odds are increasing short-term rally underway since December 19 low (1202.37) is toward end point.
• So long as prices do not break below edge of 10-Day Price Channel (1333.74--Friday), market bias will remain deciding factor.
• Ongoing failure of Cumulative Volume (CV) in S&P 500 and S&P Emini relative to index prices that have been much stronger underscores our suspicion rally since October lows has lacked internal “fortitude” necessary to sustain this rally on longer term.
• To prove point, we would need to see Minor Cycle decline substantially while threatening larger Intermediate Cycle that currently remains positive until 1230.02 and bottom of 10-Week Price Channel.
• Ultimate status of Intermediate to Major Cycles will be determined once short-term advance ends and bias of indicators relative to pricing is assessed.
• Market’s internal “health” as measured by indicators will likely determine staying power of pricing. Higher prices require indicator confirmation or strength is suspect.

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