Technicals say any stock market bounce corrective not reversal

Still, oversold condition should make bears wary

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

Market Snapshot for session ending 5-15-12:

 

Last

Day Change

%Change

S&P 500 Index

1330.66

-7.69

-.57%

Dow Jones Industrials

12632.00

-63.34

-.50%

NASDAQ Composite

2893.76

-8.82

-.30%

Value Line Arithmetic Index

2857.76

-13.88

-.48%

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 losses surfaced in major indexes Tuesday as Minor and Intermediate Cycle negatives solidified.
  • Short-term trend as measured by MAAD Daily Ratio was toward deeply “Oversold” territory (.36), however.
  • 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 8.2%% Tuesday and Average Price per share declined another 32 cents to 56.38. Highest recent average price occurred on March 15 at $61.48.
  • All indexes remained below lower edge of 10-Week Price Channels, a strong indication trend since last October has ended.
  • Normal 40% to 60% pullback of advance since October in S&P 500 could put index toward 1283-1213.
  • Daily MAAD hit another short-term low Tuesday and was last at level equal to mid-January point when S&P 500 was quoted toward 1280.
  • CPFL was negative Monday by 1.63 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 both reached new short-term lows Tuesday.

Market Overview – What We Think:

  • More weakness on short-term trend extended index price negativity Tuesday, but with a caveat -- short-term “Oversold” readings could lead to near-term bounce. At this point, such a bounce is probably inevitable.
  • We suspect any near-term retracement, however, will prove to be short-lived and will do little more than erase “Oversold” levels while resetting market for another down leg within context of intermediate negative.
  • Preliminary best guess on how far this intermediate correction will carry would be toward 1283-1213 if normal 40% to 60% pullback develops.
  • Until proven otherwise, we must regard net selling as no more than corrective action within framework of Major Cycle positive.
  • We cannot, however, disregard fact that majority of our key indicators did not confirm market strength into recent highs and that more weakness could bring market pricing into line with those indicators.

Click charts to enlarge

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

emini, daily, 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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