S&P breaks above May 2011 high; MAAD confirms

Market Snapshot for session ending 2-27-12:

 

Last

Day Change

%Change

S&P 500 Index

1363.40

+5.80

+.43%

Dow Jones Industrials

12984.69

+46.02

+.36%

NASDAQ Composite

2956.98

+23.81

+.81%

Value Line Arithmetic Index

3037.21

+28.83

+.96%

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

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:

  • S&P 500 betters May 2, 2011 peak (1370.58) Monday with intraday high at 1371.94. Dow 30 and NASDAQ Composite also rallied to new short to intermediate-term highs. Value Line index did not.
  • All indexes remain within range of upside measured move targets as calculated from October 2011 lows and via potential “Ascending Wedge” price patterns.
  • Most Actives Advance Decline Line (MAAD) was positive Monday by 15 to 5 and bettered its February 8 peak to reach best levels since March 2008
  • Daily MAAD Ratio has corrected virtually all of recent “Overbought” readings and was last toward “Neutral” while holding in potential buy zone. Weekly MAAD Ratio remains toward “Overbought” territory.
  • Trading volume in S&P 500 rose nearly 17% Monday.
  • Weakness below lower edge of 10-Day Price Channel (1346.82 / S&P 500 --Tuesday) would suggest beginning of end of Minor Cycle trend in effect since December low (1202.37 / S&P 500).
  • Cumulative Volume (CV) made new short-term high Monday in both S&P 500 and S&P Emini. But on longer-term basis CV in S&P 500 remains about 35% below 2011 highs while CV in S&P Emini is nearly 50% below similar level.
  • Daily CPFL made a new short-term high Monday, but remains substantially below February 25, 2011 plot high.
Index Daily / Weekly / Monthly Stops Weekly Monthly
2/27 2/28 2/29 3/1 3/2 3/2 3/31

S&P 500
Index

SELL
1343.90

SELL
1346.82

SELL
1348.89

SELL
1350.02

SELL
1353.00

SELL
1258.05

SELL
1189.77

Dow Jones
Industrials

SELL
12805.38

SELL
12828.20

SELL
12846.55

SELL
12856.65

SELL
12877.92

SELL
12180.17

SELL
11271.99

NASDAQ
Composite

SELL
2912.99

SELL
2918.17

SELL
2921.70

SELL
2923.20

SELL
2930.67

SELL
2641.75

SELL
2517.37

Value Line
Index

SELL
2996.66

SELL
3000.79

SELL
3002.56

SELL
3002.05

SELL
3008.47

SELL
2706.66

SELL
2612.10

Note: Stop levels, a function of the extant trend, are based on the trailing moving average price channels for the Highs or the Lows of an index. Whether or not a specific index is suggesting a “Buy” or Sell” is determined by whether or not index prices are above or below the current channel Stop levels. Stop levels should only be used as an entry or exit guide and in conjunction with other market entry and exit strategies.

Market Overview – What We Think:

  • So long as short-term trend remains positive, we can only continue to make calculated “guesses” as to there that trend will end. If price pattern developing since October proves to be Ascending Wedge, then index prices are within range of peaking. If not, longer-term trend comes into play and we will have to recalibrate.
  • When short-term trend inevitably ends, however, extent to which that cycle fades will determine staying power of larger Intermediate Cycle and by extension, the Major Cycle.
  • Fact that Daily MAAD continues to work higher is indication Smart Money has been playing this rally to some extent. Fact that larger Weekly MAAD has not mimicked Daily MAAD is a concern, however, since both cycles must be in synch ultimately to confirm positive longer-term move.
  • 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.
  • Considering fact that while price-based Ratios remain “Overbought,” Daily MAAD Ratio has corrected from “Overbought” to “Neutral,” we cannot rule out possibility market has corrected recent excesses “internally” and that more gains could follow.

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