Market bounces a bit Monday, volume fades, trend still negative

Activity on NYSE shrank nearly 14%

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

Market Snapshot for session ending 6-5-12:

 

Last

Day Change

%Change

S&P 500 Index

1285.50

+7.31

+.57%

Dow Jones Industrials

12127.95

+26.49

+.22%

NASDAQ Composite

2778.11

+18.10

+.66%

Value Line Arithmetic Index

2732.44

+30.32

+1.12%

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) Neutral / Negative

Market Overview – What We Know:

  • Small gains were posted by major indexes Tuesday, but strength was spurred by diminishing trading volume. Activity on NYSE shrank nearly 14%.
  • Average Price per share rose 6 cents to $54.97.
  • Minor Cycle remains negative and would require strength above upper edge of 10-Day Price Channel (1326.42--through Wednesday) in S&P 500. Intermediate Cycle remains negative and must rise above upper edge of 10-Week Price Channel (1406.70) to suggest reversal of currently negative trend.
  • Minor and Intermediate Cycles, as measured by our Most Actives Advance Decline Ratios, were last plotted in “Oversold” territory at .73 and .47, respectively.
  • Major Cycle Momentum turned fractionally negative last week for first time since January 2008. Reading is preliminary and requires end of month closing price in S&P 500.
  • Daily MAAD improved marginally Tuesday with 15 issues higher and 5 lower after indicator made new short-term low Monday.
  • Daily CPFL was negative Tuesday by 1.21 to 1.
  • Cumulative Volume (CV) was higher in both S&P 500 and S&P 500 Emini futures contract. Emini CV made a fractional new low Monday on Minor Cycle.

Market Overview – What We Think:

  • Following last week’s sharp losses, it wouldn’t be a surprise to see some short-covering develop near-term. But severity of recent losses and negative bias of many of our key indicators will not be easily or quickly reversed.
  • It’s true short and intermediate-term trends are “Oversold,” but if history is a guide, “Oversold” readings in a downtrend can be more a reflection of market negativity than of a buying opportunity.
  • If some rebounding develops, we suspect it will serve more to eliminate deep negatives than to provide a good buying opportunity.
  • Best we could see within current intermediate negative context would be gains toward 1400 and upper edge of 10-Week Price Channel in S&P 500. Such strength would cause Minor Cycle to turn positive since prices in bellwether S&P 500 since index would rise by default above the upper edge of a defined 10-Day Price Channel (1325.72--through Tuesday).
  • Best guess on how far current intermediate negative could carry would be 1283-1213 if “normal” 40% to 60% pullback develops on Intermediate Cycle as calculated from April S&P 500 high at 1422.38.

Click charts to enlarge

stock market, technical analysis, daily, cumulative, volume

daily, emini, s&p 500, cumulative, volume

 

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

6/4

6/5

6/6

6/7

6/8

6/8

6/30

S&P 500 Index

BUY 1324.66

BUY 1325.72

BUY 1326.42

BUY 1325.27

BUY 1322.73

BUY 1406.70

SELL 1185.81

Dow Jones Industrials

BUY 12559.06

BUY 12559.91

BUY 12558.62

BUY 12544.36

BUY 12516.48

BUY 13223.74

SELL 11413.64

NASDAQ Composite

BUY 2861.38

BUY 2862.76

BUY 2858.45

BUY 2854.77

BUY 2846.52

BUY 3079.96

SELL 2501.62

Value Line Index

BUY 2826.24

BUY 2829.86

BUY 2833.13

BUY 2828.70

BUY 2822.87

BUY 3059.19

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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