Stock market sinks Thursday, but May 18 S&P 500 low holds

Intermediate cycle remains negative

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

Market Snapshot for session ending 5-31-12:

 

Last

Day Change

%Change

S&P 500 Index

1310.33

-2.98

-.23%

Dow Jones Industrials

12393.45

-26.41

-.21%

NASDAQ Composite

2827.34

-10.02

-.35%

Value Line Arithmetic Index

2793.18

-4.48

-.16%

Minor Cycle (Short-term trend lasting days to a few weeks) Neutral / 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 pressure created small losses in all major indexes Thursday.
  • Trading volume on NYSE jumped nearly 73% and Average Price per share rose 3 cents to $55.59.
  • Minor Cycle remains negative and S&P 500 needs to rally above upper edge of 10-Day Price Channel at 1324.66 (through Friday) to suggest reversal of short-term trend to positive.
  • Intermediate Cycle also remains negative and S&P 500 needs to penetrate upper edge of 10-Week Price Channel at 1403.55 in the S&P 500 (through June 1) to suggest larger cycle reversal to positive.
  • Daily CPFL was positive Thursday by 1.12 to 1. Indicator remains above December 19 short to intermediate-term low, but not by a wide margin.
  • Market sensitive Cumulative Volume (CV) declined slightly in both S&P 500 cash index and S&P 500 Emini futures Thursday, but remain above lows made on May 18.

Market Overview – What We Think:

  • Attainment of new short-term low in Daily MAAD Wednesday is not a good sign for what looked like a developing short-term low in market. Price in S&P 500 continues to hold above May 18 interim low (1291.98), but there isn’t a lot of room between “here” and “there.”
  • While MAAD could be in end game considering fact MAAD Daily Ratio remained “Oversold” at .70 Thursday, deterioration in indicator means Smart Money has continued to liquidate equities even though some price stability came into market over past several days.
  • Even if Minor Cycle rebound develops, we suspect any near-term strength should prove to be short-lived. Gains would probably do little more than erase “Oversold” readings prior to resetting market for another down leg on Intermediate Cycle.
  • Near-term bounce in S&P 500 back toward 1400 on outside is possibility before larger Intermediate Cycle takes hold and drives bids lower.
  • Best guess on how far intermediate negative could ultimately carry would be 1283-1213 if “normal” 40% to 60% pullback develops.
  • Since majority of our key indicators did not confirm market strength into recent highs, more selling could bring market pricing into line with negative indicator divergences.

Click charts to enlarge

s&p 500, stock, index, cumulative volume

stock, index, emini, daily, cumulative volume
 

Index Daily/Weekly/Monthly Stops Weekly Monthly
 

5/28

5/29

5/30

5/31

6/1

6/1

6/30

S&P 500 Index

BUY
1335.70

BUY
1332.55

BUY
1328.73

BUY
1326.31

BUY
1324.66

BUY
1403.55

SELL
1185.81

Dow Jones Industrials

BUY
12680.44

BUY
12645.43

BUY
12605.85

BUY
12579.48

BUY
12559.06

BUY
13191.68

SELL
11413.64

NASDAQ Composite

BUY
2893.01

BUY
2884.59

BUY
2875.53

BUY
2868.70

BUY
2861.38

BUY
3074.84

SELL
2501.62

Value Line Index

BUY
2859.62

BUY
2849.63

BUY
2839.13

BUY
2831.30

BUY
2826.24

BUY
3058.37

SELL
2551.83

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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