Market off Wednesday; S&P can't better 2011 high

Market Snapshot for session ending 2-22-12:

Market Overview – What We Know:

• Selling pressures in major index prices Wednesday moved prices marginally lower. But short-term trends remain intact in all
• Most Actives Advance Decline Line (MAAD) suffered further weakness Wednesday with 2 issues higher and 18 lower to cause indicator to move within 3 issues of its February 15 short-term low. Daily MAAD was last 20 issues from equaling its February 8 and new short-term high.
• Trading volume in S&P 500 declined about 3% Wednesday.
• Short and Intermediate-term trends remain “Overbought” based on S&P 500, but Daily MAAD Ratio has moved lower from “Overbought” and was last dipping toward “Oversold” levels.
• Weakness below lower edge of 10-Day Price Channel (1340.57 / S&P 500 --Thursday) would suggest beginning of end of Minor Cycle trend in effect since December low (1202.37 / S&P 500).
• Cumulative Volume (CV) in S&P 500 made new short-term high Tuesday, but S&P Emini peaked last Thursday and has yet to better that level again. Both remain well below 2011 highs.
• Daily CPFL made new short-term high Friday after breaking above late October resistance last Tuesday. CPFL was negative Wednesday by 1.87 to 1. Indicator remains substantially below February 25, 2011 plot high.

Market Overview – What We Think:

• While it’s a bit too soon to suggest beginning of the end of Minor Cycle uptrend in effect since December 10 low (1202.37 / S&P 500), ongoing inability of bellwether to overcome major resistance at May 2, 2011 high (1370.58 / S&P 500) is further evidence this market is having problems.
• But short-term pullback must soon develop or our suggestion market has been tracing out A-B-C rally via a bearish “ascending wedge” chart pattern since October lows could become problematic.
• First sign of such a reversal would come with a break below edge of 10-Day Price Channel (1340.57--Thursday) and would then imply developing threat to larger Intermediate Cycle that is also “Overbought” and which remains positive until lower edge of 10-Week Price Channel (1243.18 / S&P 500).
• Ongoing failure of Cumulative Volume (CV) in S&P 500 and S&P Emini relative to underlying S&P 500 underscores our belief rally since October lows lacks internal “fortitude” necessary to sustain strength on longer term.
• Ultimate status of Intermediate to Major Cycles will likely be determined once short-term advance ends and bias of indicators relative to pricing is demonstrated.

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