When stock market rebounds, sellers take advantage

NYSE volume rose nearly 20% Tuesday on market weakness

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

Market Snapshot for session ending 5-8-12:

 

Last

Day Change

%Change

S&P 500 Index

1363.72

-5.86

-.43%

Dow Jones Industrials

12932.09

-76.44

-.59%

NASDAQ Composite

2946.27

-11.49

-.39%

Value Line Arithmetic Index

2923.49

-13.60

-46%

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:

  • On heels of Monday’s short-covering rally, major indexes faded again Tuesday.
  • Short-term remains negative, as Intermediate Cycle teeters on negative.
  • Via intraday trading Tuesday, S&P 500 declined below lower edge of 10-Week Price Channel to suggest “official” reversal of uptrend begun in early October. Minor support created back on April 10 (1357.38—S&P 500) was also penetrated Tuesday.
  • NYSE exchange trading volume rose nearly 20% Tuesday on market weakness.
  • Daily MAAD declined to new short-term low Tuesday with 2 issues higher and 18 lower. That action suggests Smart Money remains skeptical of market following peak in Daily MAAD back on March 20. Daily MAAD Ratio remains negative and “Oversold” (last at .72).
  • Average Price per Share declined 34 cents to $57.57 Monday. Highest recent average price level occurred March 15 at $61.48.
  • Daily CPFL was negative Tuesday by 1.57 to 1. 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 Tuesday while cash S&P 500 CV is not far behind.

Market Overview – What We Think:

  • Weakness in major indexes and broad market over past few weeks with confirming negativity by such indicators as Daily MAAD are good indication uptrend since last October is finished.
  • Question now is how far weakness will carry and what will be implications for larger Major Cycle that has been hovering near “Neutral” for months?
  • Weakness Tuesday via S&P 500, even though prices recovered somewhat into close, underscore trend toward Intermediate Cycle negative.
  • How quickly short-term “Oversold” conditions begin to take hold within context of developing intermediate weakness will determine where first rebound will occur.
  • Until Intermediate Cycle also becomes “Oversold,” however, market could remain vulnerable to renewed selling pressures.
  • Given ongoing “reluctance” of majority of our key indicators to confirm market strength into recent highs, presumption is strong 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 market, cumulative volume, daily

stock index, cumulative volume, weekly

 

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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