S&P 500, Dow 30 exhibit reversal day characteristics

Market Snapshot for session ending 2-29-12:

 

Last

Day Change

%Change

S&P 500 Index

1365.68

-6.50

-.47%

Dow Jones Industrials

12952.07

-53.05

-41%

NASDAQ Composite

2966.89

-19.87

-.67%

Value Line Arithmetic Index

3000.47

-31.81

-1.05%

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

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 and Dow Jones Industrial average exhibited “Key Reversal Day” characteristics Wednesday after S&P, Dow, and NASDAQ Composite rallied to new short to intermediate-term highs. Value Line index that was down largest percentage Wednesday did not hit new short-term high.
  • Last time S&P 500 demonstrated Key Reversal characteristics (Open was above previous day’s close; day’s high was above previous day’s high; and day’s close was below yesterday’s low) was October 11, 2007.
  • If Key Reversal is accurate again this time, at least short-term trend will turn to negative.
  • All indexes remain within range of upside measured move targets as calculated from October 2011 lows and via potential “Ascending Wedge” price patterns initiated after October lows.
  • Most Actives Advance Decline Line (MAAD) was negative Wednesday by 3 to 17 and fell back from new short to intermediate high hit Tuesday.
  • Daily MAAD Ratio was last just above “Neutral” with MAAD Weekly Ratio toward “Overbought” territory.
  • Weakness below lower edge of 10-Day Price Channel (1350.02 / 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) on longer-term in S&P 500 remains about 35% below 2011 highs while CV in S&P Emini is nearly 50% below similar level.
  • CPFL continues to languish.
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:

  • If possible Key Reversal Day Wednesday implies the same results as those produced October 11, 2007 at the exact top of market and prior to second worst decline in stock market history, very least we could expect from this point forward is a short-term decline.
  • Such smaller cycle weakness would then determine staying power of larger Intermediate Cycle that has been underway since October lows. Larger trend is also currently “Overbought.”
  • Extent to which Intermediate Cycle might weaken would then determine status of Major Cycle which continues to exhibit neutral readings.
  • Fact that Weekly MAAD has not mimicked strength of Daily MAAD is a concern since both cycles must be in synch ultimately to confirm positive longer-term move.
  • And fact that CPFL continues to exhibit lackluster performance is not a vote of confidence for bullish case.

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