Short-covering saves stock market from Sunday night losses

Short-term negative while intermediate cycle under threat.

Stock index, chart, technical analysis Stock index, chart, technical analysis

Market Snapshot for session ending 5-7-12:

 

Last

Day Change

%Change

S&P 500 Index

1369.58

+.48

+.04%

Dow Jones Industrials

13008.53

-29.73

-.23%

NASDAQ Composite

2957.76

+1.41

+.05%

Value Line Arithmetic Index

2937.09

+3.05

+.10%

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

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

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

Market Overview – What We Know:

  • Despite sharp overnight losses in S&P Emini futures contracts in early trading Sunday night, prices quickly stabilized and rallied until mid-afternoon Monday. Price action, however, will likely turn out to be short-covering in Minor Cycle negative trend.
  • Short-term remains negative while larger Intermediate Cycle remains under threat.
  • In mixed market action, NYSE exchange trading volume declined nearly 9% Monday.
  • Break below minor support in S&P 500 (1357.38) would suggest negative confirmation of Intermediate Cycle. But if that level is hit S&P would already have declined below lower edge of 10-Week Price Channel (1369.70) and downside “failsafe” point of intermediate trend.
  • Daily MAAD was near Neutral Monday with 10 issues higher and 9 lower. Daily MAAD Ratio remains near Neutral (.92). Daily MAAD hit a new short-term low last Friday at a level not seen since late January when S&P 500 was bid near 1300.
  • Average Price per Share rose 61 cents to $57.91 Monday. Highest recent average price level occurred March 15 at $61.48.
  • Daily CPFL was sharply negative Monday by 1.29 to 1 while indicator remains below April 9 short-term high. Both Daily and Weekly CPFL remain well below indicator resistance high put in place February 2011.
  • Cumulative Volume (CV) in S&P 500 Emini futures contract declined to new short-term low last Friday while cash S&P 500 CV is not far behind. CV indicators for both remain well below 2011 highs

Market Overview – What We Think:

  • Odds are good uptrend underway since last October 4 is over.
  • Question now developing is how far weakness will carry and what will be the implications for larger Major Cycle that has been hovering near “Neutral” for months?
  • Since odds are good weakness will soon develop below lower edge of 10-Week Price Channels (1369.70—S&P 500) at statistical support and minor support (1357.38—S&P 500), how quickly market becomes “Oversold” and where prices stabilize will determine severity of decline.
  • Given ongoing “reluctance” of the majority of our key indicators to confirm market strength into recent highs, next presumption could be that selling could carry on downside far further than many market practitioners expect.
  • Three indicators, MAAD, CPFL, and CV that measure Smart Money bias, sentiment, and the power of buying continue to indicate market underpinnings remain weak and that price action could adjust accordingly.

Click charts to enlarge

stock index, s&p, cumulative volume

cumulative volume, emini, stock index, technical analysis


Index Daily / Weekly / Monthly Stops Weekly Monthly
 

5/7

5/8

5/9

5/10

5/11

5/11

5/31

S&P 500 Index

BUY
1394.36

BUY
1398.63

BUY
1400.69

BUY
1402.05

BUY
1401.07

SELL
1369.70

SELL
1175.98

Dow Jones Industrials

SELL
13042.98

SELL
13074.37

SELL
13104.35

SELL
13128.33

SELL
13119.36

SELL
12918.39

SELL
11273.01

NASDAQ Composite

BUY
3039.96

BUY
3048.72

BUY
3052.54

BUY
3056.05

BUY
3048.61

BUY
3057.13

SELL
2485.38

Value Line Index

BUY
3014.53

BUY
3024.81

BUY
3028.13

BUY
3030.40

BUY
3024.39

BUY
3077.34

SELL
2543.91

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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