Stock market bounces higher, but minor cycle still negative

Selling has created short-term oversold condition

Market Snapshot for session ending 4-11-12:

 

Last

Day Change

%Change

S&P 500 Index

1368.71

+10.12

+.74%

Dow Jones Industrials

12805.39

+89.46

+.70%

NASDAQ Composite

3016.46

+25.24

+.84%

Value Line Arithmetic Index

2949.07

+38.62

+1.33%

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:

  • Major indexes stage modest recovery Wednesday after Tuesday’s sharp losses, but Minor Cycle remains negative.
  • Larger and more important Intermediate Cycle remains positive until 1331.26 at lower edge of 10-week Price Channel, but that larger trend is “Overbought” and vulnerable.
  • Selling over past several days has created short-term “Oversold” condition as measured by our Most Actives Daily Ratio (.61). Short-term “Oversold” conditions can persist in early stages of Intermediate Cycle decline, however.
  • 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, but buying above upper edge of 10-Day Price Channel (1414.28 / Thursday) would occur first.
  • Despite increase in average price per share on NYSE Wednesday, trading volume declined by nearly 19%.
  • MAAD was negative Wednesday with 16 issues higher and 4 lower.
  • Daily CPFL was sharply negative Wednesday by .90 to 1. Both Daily and Weekly CPFL remain substantially below resistance at February 2011 CPFL highs.

Market Overview – What We Think:

  • Fact that S&P 500 stalled on downside Wednesday right at uptrend line stretching back to October lows may be good for near-term cycle, but it says little about staying prospects of larger Intermediate trend.
  • Best guess is that any “return action” over next several sessions, if it even lasts that long, will fail and that Tuesday’s low (1357.38—S&P 500) will be breached as bias of Intermediate Cycle takes on more negative tone.
  • Developing short-term “Oversold” conditions could allow for the upward bounce.
  • Since Intermediate Cycle remains positive, we cannot yet rule out possibility bulls will pick up “bargains” on weakness and keep intermediate trend positive.
  • Recent 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 that Intermediate Cycle may be in end game.
  • With Cumulative Volume (CV) still weaker than index pricing relative to 2011 highs in S&P 500, Dow 30, and NASDAQ Composite, lack of meaningful participation in market over past several months has been underscored.

Click charts to enlarge

stock, market, s&p, technical, analysis, cumulative volume

stock, market, s&p, technical, analysis, cumulative volume


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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