Market near key resistance: 'Do or die’ on negative trend

Market Snapshot for session ending 3-8-12:

Market Overview – What We Know:

• Major indexes extended gains Thursday in wake of recent losses, but none has been able to overcome statistical resistance at upper edge of 10-Day Price Channels (1372.49 / S&P 500 and 2983.64 / NASDAQ Composite).
• To re-assert Intermediate Cycle advance begun after October lows, S&P 500 would need to exceed February 29 intraday high at 1378.04 with NASDAQ Composite moving above 3000.11.
• Trading volume was off slightly in S&P 500 Thursday and up a bit in NASDAQ.
• Recent negativity and subsequent return move developed after major indexes moved within range of upside measured move targets as calculated from October 2011 lows.
• Most Actives Advance Decline Line (MAAD) was positive Thursday by 15 to 5, but indicator has yet to overcome February 8 short-term peak. Daily MAAD Ratio was last toward “Oversold” territory while Weekly MAAD has yet to better actual 2011 high.
• CPFL was positive Thursday by 1.40 to 1, but indicator remains below downtrend line stretching back to February 2011 indicator highs.
• Cumulative Volume in S&P 500 and S&P Emini futures contract has recovered about 50% of losses since Monday’s highs, but is nowhere near 2011 highs.

Market Overview – What We Think:

• Strength since Monday’s lows still looks/feels like short-covering rally, but movement back above upper edge of defined 10-Day Price Channel (1372.49—S&P 500) would jeopardize short-term negative trend and set market up for serious challenge to February 29 intraday high at 1378.04—S&P 500.
• Strength in S&P back above February 29 high would not only negate possible Key Reversal Day formed during that session, but it would likely re-assert Intermediate Cycle uptrend initiated after October lows.
• If, however, index Price Channels and recent highs hold, case could be made that recent highs (1378.04—S&P 500) could prove to be best levels market will see for some time to come. 
• In addition, fact that last such KRD pattern occurred at beginning of second worst stock market decline in history is cause for concern since development of new pattern implies negative potential. 
• Resumption of short-term weakness would determine staying power of larger intermediate trend that has been underway since October lows. And weakness in Intermediate Cycle would exert pressure on larger major trend that continues to exhibit neutral readings.

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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