S&P, Dow 30 build key reversal day near price targets

Stock indexes may have tipped their hand for a long-term trend shift

Market Snapshot:

 

Last

Week Chg

Week %Chg

S&P 500 Index

1369.63

+3.89

+.28%

Dow Jones Industrials

12977.57

-5.38

-.04%

NASDAQ Composite

2976.19

+12.44

+.41%

Value Line Arithmetic Index

2985.78

-49.22

-1.62%

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

While price action in the major indexes last week ended mixed, it was last Wednesday that provided a “how ‘bout that?” kind of session when both the S&P 500 and the Dow Jones Industrial Average put in place possible Key Reversal price action characterized by an Open above the previous day’s close; a high above the previous day’s high; and a close below yesterday’s low.

We say “possible Key Reversal” because it remains to be seen how the “possible” part of the equation is going to play out. Prices did weaken Friday after some weak strength on Thursday and the Value Line index slid downward through the lower edge of its 10-Day Price Channel to suggest the beginning of the end of the Minor Cycle advance in VAY that began after the December 19 low at 2570.52.

Ascending Wedge” Index price targets and attainment – or not

Issue

Last

Target

Recent High

+/- to Target

Above 2011?

S&P 500

1369.63

1376.55

1378.04

+.10%

Yes

Dow 30

12977.57

13111.99

13055.75

-.42%

Yes

NASDAQ

2976.19

2896.03

3000.11

+3.59%

Yes

Value Line

2985.78

3055.67

3051.33

-.14%

No

Russell 2000

802.42

846.92

833.02

-1.64%

No

Dow 20

5160.13

5384.55

5384.15

-.007%

No

But there is something larger at play if the Key Reversal pattern is a precursor of things to come. Not only would we look for an end to the short-term advance begun after those mid-December lows, but the odds would be good that a high on the larger Intermediate Cycle begun after the October lows may have been put in place.

Market Overview – What We Know:

  • Potential Key Reversal Day price pattern that developed last Wednesday in S&P 500 and Dow 30 (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) could have negative implications on short to intermediate trend so long as neither index makes a new high (1378.04—S&P 500, 13055.75—Dow 30).
  • 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 Friday by 9 to 11, but did not exceed new short to intermediate high hit Tuesday. Weekly MAAD was positive by 15 to 5, but larger cycle indicator has yet to exceed 2011 highs as Did Daily MAAD.
  • Daily MAAD Ratio was last moving toward moderately “Overbought” territory while MAAD Weekly Ratio was near “Overbought.”
  • Weakness below lower edge of 10-Day Price Channel (1354.08 / S&P 500 -- Monday) would suggest beginning of end of Minor Cycle trend in effect since December low (1202.37 / S&P 500).

So you ask, “What’s the reliability of the Key Reversal Day price pattern?” First it’s rare, but when it does develop in indexes or individual issues, it has a very good record of predicting a breakdown in market pricing, especially after a long uptrend. “When was the last time a KRD developed?” It was on October 11, 2007 at the exact day high of the bull move and is now recorded in the financial history books as the second worst decline in stock market history. In fact, the broad market has yet to recover from some aspects of that bear market.

Page 1 of 4 >>
Comments
comments powered by Disqus