Stock's positive minor trend over; focus on intermediate

Indexes will attempt to recover upward momentum

Market Snapshot for session ending 3-6-12:

 

Last

Day Change

%Change

S&P 500 Index

1343.36

-20.97

-1.54%

Dow Jones Industrials

12759.15

-203.65

-1.57%

NASDAQ Composite

2910.32

-40.16

-1.36%

Value Line Arithmetic Index

2915.27

-59.14

-1.99%

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

Intermediate Cycle (Medium trend lasting weeks to several months) Positive / Neutral

Major Cycle (Long-term trend lasting several months to years) Positive / Neutral

Market Overview – What We Know:

  • Sharp losses across board in all major indexes Tuesday likely ended short-term advance begun after December 19 lows in that all indexes moved downward below lower edges of defined 10-Day Price Channels.
  • Selling was accompanied by 20% increase in volume in S&P 500.
  • Further selling would then make larger and more important Intermediate Cycle an issue to extent defined lower boundaries of 10-Week Price Channels hold. Downside break below those points would then place Major Cycle in jeopardy.
  • Negativity developed after all of major indexes moved within range of upside measured move targets as calculated from October 2011 lows and via potential “Ascending Wedge” price patterns.
  • With S&P 500 selling below lower edge of 10-Day Price Channel Tuesday, nothing but strength back above upper edge of same 10-Day Price Channel (1369.64) would suggest reversal of short-term trend back to positive.
  • Most Actives Advance Decline Line (MAAD) was negative Tuesday by 1 to 19 with indicator sinking to its lowest levels since February 15 and back below March 2011 high. Daily MAAD Ratio was last dipping toward “Oversold” territory while Weekly MAAD has yet to exceed 2011 high.
  • CPFL was decidedly negative Tuesday by 2.20 to 1. Indicator remains in downtrend initiated after February 25, 2011 indicator highs.

Market Overview – What We Think:

  • Given fact market negativity developed after major indexes moved within range of upside measured move targets as calculated from October lows, case can now be made that recent highs (1378.04—S&P 500) could prove to be best levels market will see for some time to come. At very least S&P must now improve 34.45 points to re-assert larger Intermediate Cycle.
  • With Key Reversal Day created last Wednesday gaining greater credibility as market has weakened, fact that last such KRD pattern occurred at the beginning of second worst stock market decline in history is cause for concern since development of that pattern implies potential for larger cycle negativity.
  • If KRD is correct that market has seen an important high, very least we could expect from this point forward is further losses on Minor Cycle.
  • Short-term weakness would determine staying power of larger intermediate trend that has been underway since October lows. Weakness in Intermediate Cycle would exert pressure on larger major trend that continues to exhibit neutral readings.
  • Fact that Weekly MAAD has not mimicked strength of Daily MAAD is bearish sign 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 cause.
Index Daily/Weekly/Monthly Stops Weekly Monthly
 

3/5

3/6

3/7

3/8

3/9

3/9

3/31

S&P 500 Index

SELL 1354.08

SELL 1356.84

SELL 1358.80

SELL 1360.72

SELL 1362.28

SELL 1270.16

SELL 1189.77

Dow Jones Industrials

SELL 12884.94

SELL 12902.19

SELL 12912.44

SELL 12922.52

SELL 12929.39

SELL 12283.19

SELL 11271.99

NASDAQ Composite

SELL 2932.51

SELL 2939.71

SELL 2945.08

SELL 2951.86

SELL 2956.29

SELL 2675.83

SELL 2517.37

Value Line Index

BUY 3039.97

BUY 3042.13

BUY 3044.05

BUY 3042.95

BUY 3038.91

SELL 2747.77

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.

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