Stock market locked in eight-day trading range

Stock index, chart, technical analysis

Market Snapshot for session ending 08-15-12

Market Overview – What We Know:

• S&P 500, NASDAQ Composite, and Value Line index were slightly higher Wednesday. Dow Jones Industrial Average was slightly negative.
• Broad market has been moving laterally for nearly a week.
• NYSE trading volume sank 12% and remains sub normal below its 10-Day moving average.
• Short-term trend remains positive until lower edge of 10-Day Price Channel (1384.83 through Thursday) while Intermediate Cycle would require weakness below lower edge of 10-Week Price Channel (1313.24 through August 17) to turn negative.
• Short-term Momentum and our proprietary Trading Oscillators remain positive and “Overbought.”
• Daily MAAD was positive Wednesday by 13 to 7 while holding below resistance high made July 3. Daily MAAD Ratio was last at 1.26.
• CPFL was positive Wednesday by 2.45 to 1.

Market Overview – What We Think:

• It remains to be seen if S&P 500 will be able to overcome resistance high (1422.38) put in place April 2 to re-assert major advance begun in March 2009.
• Given upside failure of Daily MAAD since July 3, and despite market strength since then, we continue to wonder if price gains since June 4 lows could prove to be end game prior to more serious decline on larger Intermediate Cycle.
• Lingering negative divergence by Daily MAAD is suggestion Smart Money has been doing more selling into strength over past several weeks than buying.
• If market fails short of March/April highs (1422.38--S&P 500), turns negative on Minor Cycle, and then threatens reversal of Intermediate Cycle positive, long-term uptrend stretching back to March 2009 lows would almost immediately become an issue since that trendline is now approximately coincident with June lows (1266.74—S&P 500).
• If recent rally is legitimate and has more room to go on upside, where’s indicator corroboration? We cannot remember instance where market powered higher on long term indefinitely without confirmation from key indicators.

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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