S&P 500 to intermediate high, but average share price lags

Minor and Intermediate Cycles remain positive, but overbought

Market Snapshot for session ending 3-26-12:

 

Last

Day Change

%Change

S&P 500 Index

1416.51

+19.40

+1.39%

Dow Jones Industrials

13241.63

+160.89

+1.23%

NASDAQ Composite

3122.57

+54.65

+1.78%

Value Line Arithmetic Index

3109.66

+49.95

+1.63%

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 NASDAQ Composite index rallied to new intermediate-term highs Monday. But while gains were posted by Dow 30 and 20, Value Line Index and Russell 2000, prices in those issues did not exceed 2011 highs.
  • Minor and Intermediate Cycles remain positive, but “Overbought.”
  • Selling below lower edge of 10-Day Price Channel (1388.59—S&P 500 / Tuesday) would be required to end Minor Cycle uptrend. Intermediate Cycle at lower edge of 10-Week Price Channel would be threatened with price weakness below 1313.50 in S&P 500.
  • Trading volume on NYSE dipped 1.7% Monday as price of average share on NYSE rose 78 cents to $59.14. But despite new highs in S&P and NASDAQ, best recent NYSE average share price was recorded March 15 at $61.48.
  • Short-term Momentum has confirmed none of recent strength in any of major indexes to recent best bids for move. Nor has Intermediate Cycle Momentum.
  • Daily Most Actives (MAAD) was positive Monday with 17 issues up and 3 down. Daily MAAD did not make new high with S&P and NASDAQ. Daily MAAD Ratio was last moderately “Overbought” at 1.57.
  • Daily CPFL was positive Monday by 2.81 to 1. Both Daily and Weekly series remain substantially below February 2011 highs.

Market Overview – What We Think:

  • Intermediate Cycle that has been underway since last October 4 is certainly due for some corrective action, but strength Monday by S&P and Dow makes “Overbought” condition on both Minor and Intermediate Cycles almost irrelevant. 
  • While Momentum on short and intermediate-term cycles keeps suggesting index pricing could be losing upside steam, better clue may rest in price of average share on NYSE. Despite new highs, average price Monday ($59.14) was unable to better peak price ($61.48) hit back on March 15. Divergence could be sign fewer and fewer issues are leading market to new highs.
  • But if pricing corrects “Overbought” excesses on near-term without significant price weakness, possibility exists market could be performing “setup” for further gains. Such action preceded most recent near-term rally following abortive Key Reversal Day on February 29.
  • Fact that Cumulative Volume (CV) remains weak in S&P 500, Dow 30, and NASDAQ Composite, however, underscores fact participation in market over past several months, let alone last decade with historically low trading volume, is abnormal and probably unsustainable, at least as it relates to higher index prices on long-term.

 

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

3/26

3/27

3/28

3/29

3/30

3/30

3/31

S&P 500 Index

SELL1384.06

SELL1388.59

SELL1392.62

SELL1393.44

SELL1393.27

SELL1313.50

SELL1189.77

Dow Jones Industrials

SELL13079.70

SELL13104.35

SELL13120.04

SELL13111.79

SELL13097.57

SELL12596.11

SELL11271.99

NASDAQ Composite

SELL3013.37

SELL3024.94

SELL3037.10

SELL3043.21

SELL3046.31

SELL2807.61

SELL2517.37

Value Line Index

SELL3024.10

SELL3034.78

SELL3043.84

SELL3044.24

SELL3041.66

SELL2886.13

SELL2612.10

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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