Stock indexes confirm short-term negative, but already oversold

Indicators diverge on bearish/bullish signals

Market Snapshot for session ending 4-9-12:

 

Last

Day Change

%Change

S&P 500 Index

1382.20

-15.88

-1.14%

Dow Jones Industrials

12929.59

-130.50

-1.00%

NASDAQ Composite

3047.08

-33.42

-1.08%

Value Line Arithmetic Index

2975.16

-44.60

-1.48%

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

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:

  • Selling in major indexes Monday confirmed reversal of short-term trend to negative.
  • With weakness, however, has come movement back toward “Oversold” territory as measured by our Daily MAAD Ratio that was last plotted at .69 toward zone that historically has coincided with short-term low.
  • S&P 500 would have to better 1422.38 at April 2 intraday high to create new high for move and best levels since October 2011 lows.
  • Trading Volume Monday was ahead less than 1% on NYSE relative to last Thursday’s action.
  • Intermediate Cycle based on Weekly index pricing remains “Overbought.”
  • To re-assert Intermediate Cycle uptrend, buying would now be required above upper edge of 10-Day Price Channel (1412.52—S&P 500 / Tuesday). Intermediate Cycle at lower edge of 10-Week Channel would be threatened with weakness below 1331.26 in S&P 500 (through April 13).
  • MAAD was negative Monday with 3 issues positive and 17 negative.
  • Daily CPFL was positive Monday and hit a new short-term high, its best level since December 19. Daily CPFL Ratio was positive at 1.95 to 1. Neither Daily nor Weekly series is anywhere near overcoming major resistance at February 2011 highs.

Market Overview – What We Think:

  • Since short-term trend is already looking “Oversold” after two days of selling pressure, given fact Intermediate Cycle is still positive, we cannot rule out possibility current weakness is merely near-term corrective action within context of still positive Intermediate Cycle.
  • Potential positive flavor on short-term trend has been underscored by fact that while index pricing has moved lower, our Call/Put Dollar Value Flow Line (CPFL) has been moving upward. That action suggests options players remain optimistic, despite index price weakness.
  • In other words, if buyers once again pick up “bargains” on weakness, as short-term “Overbought” conditions are eliminated, intermediate trend could remain viable and new highs for move could develop.
  • But failure of Weekly MAAD to better 2011 indicator highs, despite strength in major indexes above similar levels, is ongoing suggestion internal strength of market has not been and is not what it should be.
  • And fact that Cumulative Volume (CV) remains weaker than index pricing relative to 2011 highs in S&P 500, Dow 30, and NASDAQ Composite underscores lack of strong participation in market over past several months.

Click charts to enlarge

stock market, technical, analysis, cumulative, volume

stock market, technical, analysis, cumulative, volume, emini

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

4/9

4/10

4/11

4/12

4/13

4/13

4/30

S&P 500 Index

BUY1412.52

BUY1414.02

BUY1414.28

BUY1412.35

BUY ---

SELL1331.26

SELL1178.00

Dow Jones Industrials

BUY13216.24

BUY13227.26

BUY13225.58

BUY13203.73

BUY ---

SELL12712.21

SELL11223.60

NASDAQ Composite

BUY3111.14

BUY3115.73

BUY3111.80

BUY3107.41

BUY ---

SELL2864.91

SELL2492.41

Value Line Index

BUY3089.90

BUY3091.07

BUY3085.20

BUY3075.47

BUY ---

SELL2925.91

SELL2564.71

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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