Indexes sink again, but set up for short-term bounce

Intermediate cycle now negative

Stock market, technical analysis, map Stock market, technical analysis, map

Market Snapshot for session ending 5-14-12:

 

Last

Day Change

%Change

S&P 500 Index

1338.35

-15.04

-1.11%

Dow Jones Industrials

12695.35

-125.24

-.98%

NASDAQ Composite

2902.58

-31.24

-1.06%

Value Line Arithmetic Index

2871.65

-37.18

-1.28%

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

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

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

Market Overview – What We Know:

  • Further selling developed across the board Monday and all major indexes lost ground.
  • Short-term trend remains negative, but is “Oversold.”
  • MAAD Daily Ratio was last plotted at .50 and level that could precede near-term bounce. Intermediate Cycle is also negative.
  • Trading volume on NYSE rose 2% Monday as Average Price per share sank 32 cents to 56.70. Highest recent average price occurred on March 15 at $61.48.
  • All indexes were last below lower edge of 10-Week Price Channels, a strong indication trend since last October is over.
  • Normal 40% to 60% pullback of advance since October in S&P 500 could put index toward 1283-1213.
  • Daily MAAD hit new short-term low Monday and was last at point equivalent to mid-January level when S&P 500 was quoted toward 1290.
  • CPFL was negative Monday by 2.11 to 1 and remains below April 9 short-term high.
  • Cumulative Volume (CV) in both S&P 500 and S&P 500 Emini futures contracts declined to new short-term lows Monday and to lowest levels since early February when S&P 500 was quoted marginally below current levels.

Market Overview – What We Think:

  • More weakness on short-term trend and developing negativity on larger Intermediate Cycle last week, and again Monday, solidified negativity, but with a caveat – short-term “Oversold” readings could lead to near-term bounce.
  • We suspect any bounce, however, will prove to be relatively short-lived and will do little more than erase “Oversold” levels while resetting market for another down leg within context of intermediate negative.
  • Question is how far intermediate weakness will carry if pullback from March/April highs proves to be more than “normal,” given lingering indicator weakness? And what will be implications for larger Major Cycle that has been hovering near “Neutral” for months? Preliminary best guess is that weakness on order of 40% to 60% of gain in S&P 500 since October (1283-1213) could develop.
  • But until proven otherwise, we must regard current selling as no more than corrective action within framework of Major Cycle positive.
  • We cannot, however, disregard fact that majority of our key indicators to confirm market strength into recent highs and that selling could bring market pricing into line with those indicators.
  • Three indicators including MAAD, CPFL, and CV that measure Smart Money bias, sentiment, and the power of buying continue to indicate market underpinnings remain problematic.

Click charts to enlarge

daily, s&p, cumulative volume, analysis

daily, emini, s&p, technical analysis, cumulative volume

 

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

5/14

5/15

5/16

5/17

5/18

5/18

5/31

S&P 500 Index

BUY
1396.82

BUY
1391.79

BUY
1385.89

BUY
1380.88

BUY
1376.49

BUY
1400.66

SELL
1175.98

Dow Jones Industrials

BUY
13213.51

BUY
13176.66

BUY
13126.36

BUY
13081.20

BUY
13038.93

BUY
13163.73

SELL
11273.01

NASDAQ Composite

BUY
3036.10

BUY
3020.45

BUY
3004.57

BUY
2990.46

BUY
2980.13

BUY
3064.63

SELL
2485.38

Value Line Index

BUY
3011.34

BUY
2997.33

BUY
2981.62

BUY
2969.13

BUY
2957.86

BUY
3069.54

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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