Market struggles higher early Monday, fades at resistance

July 31, 2012 02:35 AM
NYSE trading volume shrank 28%

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Market Snapshot for session ending 7-30-12

 

Last

Day Change

%Change

S&P 500 Index

1383.58

-2.39

-.17%

Dow Jones Industrials

13057.91

-17.75

-.14%

NASDAQ Composite

2947.44

-10.65

-.36%

Value Line Arithmetic Index

2884.54

-12.52

-.43%

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

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

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

Market Overview – What We Know:

  • Unable to follow through on Friday’s gains, major indexes posted small losses Monday.
  • NYSE trading volume shrank 28% compared to Friday’s activity and Average Price per Share lost 13 cents to $59.06.
  • Short-term trend nonetheless remains positive with favorable tone to larger Intermediate Cycle.
  • To suggest short-term negative S&P 500 would need to sell below lower edge of 10-Day price Channel (1347.06 through Tuesday). Intermediate Cycle remains positive until lower edge of 10-Week price Channel (1304.85 through August 3).
  • Short-term Momentum was last moving toward moderately “Overbought” levels along with our proprietary Trading Oscillators and Daily MAAD and CPFL Ratios.
  • Daily MAAD was marginally negative Monday by 8 to 11.
  • Daily CPFL was negative by 1.24 to 1.
  • Cumulative Volume (CV) in S&P 500 and S&P 500 Emini futures contract has remained in relative synch with market since June 4 lows, but remains weaker than prices on long-term trend.

Market Overview – What We Think:

  • Failure of major indexes to punch deeper into resistance Monday makes us wonder if that same resistance could become increasingly problematic as short-term “Overbought” conditions develop in sessions just ahead.
  • Beyond that looms highs of late March/early April (1422.38—S&P 500) that must be overcome to not only re-assert short to intermediate-term advance, but to also re-assert long-term up[trend begun in March 2009. Failures in either would not bode well for market staying power.
  • Lingering negative divergence by Daily MAAD that has confirmed none of market strength since peaking July 3 is ongoing suggestion Smart Money has been doing more selling into strength over past few weeks than buying. While S&P was last holding in excess of 1380, Daily MAAD was positioned at equivalent S&P price of about 1320.
  • And while there has been some improvement in CPFL data recently, that indicator still faces major resistance via a plot high made back on April 9. Daily CPFL Ratio was also last toward moderately “Overbought” levels.
  • If prices continue to fail on upside, that failure would take on long-term implications since it would suggest market is losing upside steam. All that would be required then would be new short-term negative and downside break to turn Intermediate Cycle negative (below 1304.85—S&P 500).

stock, cumulative, volume, s&p

cumulative, volume, emini

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

7/23

7/24

7/25

7/26

7/27

7/27

7/31

S&P 500 Index

SELL
1340.90

SELL
1340.81

SELL
1343.45

SELL
1348.40

SELL
1351.56

SELL
1306.76

SELL
1205.40

Dow Jones Industrials

SELL
12630.30

SELL
12624.32

SELL
12640.99

SELL
12683.92

SELL
12711.70

SELL
12407.09

SELL
11616.99

NASDAQ Composite

SELL
2887.90

SELL
2882.21

SELL
2883.18

SELL
2893.98

SELL
2899.95

SELL
2812.04

SELL
2553.42

Value Line Index

SELL
2856.02

SELL
2850.81

SELL
2851.19

SELL
2857.50

SELL
2858.89

SELL
2768.16

SELL
2598.64

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.

Next page: Indicator review

We are also updating the daily chart of both the Call/Put Dollar Value Flow Line (CPFL) and Most Actives Advance/Decline Line (MAAD) indicators every day and providing the most recent raw data so you can begin to plot the indicators on your own (see below). The weekly equity index indicator summary provides longer-term commentary based on these indicators.

The definitions of the indicators along with links to the original stories provide helpful background. Also, Robert describes these indicators in a recent I-Trade show presentation available online.

Click charts to enlarge

indicator, technical, maad, s&p

indicator, technical, cpfl

MAAD Daily data for past 30 days*

 CPFL data for past 30 Days

Date

NYSE Adv

NYSE Dec

Date

OEX Call $Volume

OEX Put $Volume

6-18-12

10

10

6-18-12

13515

21164

6-19-12

17

3

6-19-12

39369

21585

6-20-12

12

8

6-20-12

11979

29586

6-21-12

2

18

6-21-12

14856

71605

6-22-12

16

2

6-22-12

12696

22036

6-25-12

0

20

6-25-12

17465

40584

6-26-12

10

9

6-26-12

29734

20929

6-27-12

15

4

6-27-12

19044

12440

6-28-12

5

15

6-28-12

23306

18980

6-29-12

14

5

6-29-12

69249

25566

7-2-12

14

6

7-2-12

14284

13216

7-3-12

18

2

7-3-12

14032

14294

7-5-12

6

14

7-5-12

26514

21394

7-6-12

1

19

7-6-12

15037

19765

7-9-12

6

14

7-9-12

7782

10585

7-10-12

1

19

7-10-12

9474

30206

7-11-12

11

9

7-11-12

13716

20738

7-12-12

4

16

7-12-12

17249

29638

7-13-12

17

3

7-13-12

48805

15073

7-16-12

8

12

7-16-12

20009

19221

7-17-12

15

5

7-17-12

42838

26385

7-18-12

13

7

7-18-12

59506

26094

7-19-12

10

9

7-19-12

45489

16478

7-20-12

3

17

7-20-12

35430

39286

7-23-12

8

12

7-23-12

35642

28992

7-24-12

3

17

7-24-12

36891

36155

7-25-12

13

7

7-25-12

33864

25110

7-26-12

13

7

7-26-12

74148

31857

7-27-12

19

1

7-27-12

10379

24155

7-30-12

8

11

7-30-12

20610

25618

*Note: Unchanged issues are not counted.

About the Author

Robert McCurtain is a technical analyst/market timer, private investor and financial markets consultant based in New York City. He can be reached at traderbob@nyc.rr.com.