Stock market fades Thursday after hitting statistical resistance

Trading volume on NYSE shrank marginally

Stock ticker, distorted Stock ticker, distorted

Market Snapshot for session ending 6-7-12:

 

Last

Day Change

%Change

S&P 500 Index

1314.99

-.14

-.01%

Dow Jones Industrials

12460.96

+46.17

+.37%

NASDAQ Composite

2831.02

-13.70

-.48%

Value Line Arithmetic Index

2788.64

-13.00

-.46%

Minor Cycle (Short-term trend lasting days to a few weeks) Neutral / Positive

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:

  • Rebounding in major indexes over past few sessions slowed Thursday as all indexes succumbed to profit-taking once intraday highs were reached just after opening bids.
  • Profit-taking and intraday reversal began to develop when index pricing, as measured by S&P 500, hit upper edge of 10-Day Price Channel at 1325.27 Thursday morning.
  • Trading volume on NYSE shrank marginally by just over 1% with Average Price per share adding only pennies to $56.23.
  • To suggest positive turn on Minor Cycle, S&P 500 must rally above upper edge of 10-Day Price Channel (1322.73 through Friday). Intermediate Cycle requires S&P 500 strength above upper edge of 10-Week Price Channel (1406.70) to suggest reversal of currently negative trend.
  • Minor Cycle remains modestly “Oversold” as measured by our Most Actives/Advance Decline Ratio that last plotted at .76 on Thursday.
  • Daily MAAD faded Thursday with 5 issues higher and 14 lower. Indicator remains in short-term downtrend begun after March 20 Daily MAAD high.
  • Daily CPFL was positive Thursday by 1.37 to 1.
  • Cumulative Volume (CV) in both S&P 500 and S&P 500 Emini futures contract pulled back slightly Thursday, but nonetheless remains in short-term downtrend.

Market Overview – What We Think:

  • Price fade in face of statistical resistance Thursday at upper edge of 10-Day Price Channels shouldn’t be surprise. But until “Oversold” conditions are fully unraveled, market will probably not be ready for another downdraft within context of Intermediate Cycle negative.
  • In other words, we could see additional short-term gains and probably a change of Minor Cycle to positive.
  • If rebounding continues, however, we suspect it will serve more to eliminate recent deep negatives than to provide a sustainable rally on larger cycles.
  • Best we could see within current intermediate negative context would be strength toward 1400 and upper edge of 10-Week Price Channel in S&P 500. Such a move would cause Minor Cycle to turn positive since prices in bellwether S&P 500 index would rise by default above the upper edge of defined 10-Day Price Channel (1322.73--through Friday).
  • In event larger Intermediate Cycle resumes downward course, we could see weakness in S&P 500 toward 1283-1213 if “normal” 40% to 60% pullback develops as calculated from April S&P 500 high at 1422.38.

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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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