Market sinks, recovers Wednesday; minor cycle in limbo

NYSE trading volume declined

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

Market Snapshot for session ending 08-22-12

 

Last

Day Change

%Change

S&P 500 Index

1413.49

+.32

+.02%

Dow Jones Industrials

13172.76

-30.82

-.23%

NASDAQ Composite

3073.67

+6.41

+.21%

Value Line Arithmetic Index

2989.04

-7.88

-.26%

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

Note: Due to an oversight, in Tuesday’s Market Snapshot we incorrectly suggested price action in the S&P 500 Tuesday traced out a “Key Reversal Day.” If fact, it did not, since Tuesday’s closing price in the S&P 500 (1413.17) did not close below Monday’s low (1412.12). But our assertion that a KRD occurred in the Dow Jones Industrial Average was correct.

Market Overview – What We Know:

  • Major indexes finished mixed Wednesday following early session losses and then some recovery.
  • NYSE trading volume declined nearly 7% and Average Price per Share rose 22 cents to $59.76. Highest recent AP/S was $61.48 on March 15.
  • Short-term trend remains positive until lower edge of 10-Day Price Channel (1398.68 through Thursday). Intermediate Cycle would require weakness below lower edge of 10-Week Price Channel (1319.82 through August 24) to turn negative.
  • Short-term Momentum was last positive in S&P 500, but fading toward “Neutral,” and has confirmed none of new short-term highs in S&P 500 since August 10.
  • Our proprietary Trading Oscillators remain positive, but “Overbought,” on both Minor and Intermediate Cycles.
  • Daily MAAD was flat Wednesday with 10 issues higher and 10 lower while MAAD Daily Ratio was near “Neutral” at 1.09. Daily MAAD continues to hold below peak made July 3.
  • CPFL was negative Wednesday by 1.17 to 1. Daily and Weekly CPFL Ratios remain toward “Overbought.”
  • Despite strength in S&P 500 Emini last week above March resistance high, Cumulative Volume (CV) did not confirm price action. Or in Cash S&P CV.

Market Overview – What We Think:

  • Tuesday’s price reversal may have signaled an end to rally in effect since June 4 lows.
  • Ongoing negative divergence by Daily MAAD in face of market strength since MAAD peaked July 3 reflects fact Smart Money has been exiting, if not simply avoiding, market for several weeks. With that disparity in place, odds will continue to suggest short-term high, and possible intermediate peak, are imminent if they have not already been reached via Tuesday’s net losses.
  • If market 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 trendline is now approximately coincident with those June lows (1266.74—S&P 500). In other words, if June lows are fractured on renewed selling, odds would be good major advance since March 2009 could be finished.
  • If recent rally is legitimate and has more room to go on upside, we continue to wonder about indicator corroboration? We cannot remember instance where market powered higher on long term indefinitely without confirmation from key indicators. Tuesday’s reversal may have finally resolved that problem.

cumulative, volume, s&p

cumulative, volume, emini

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

8/20

8/21

8/22

8/23

8/24

8/24

8/31

S&P 500 Index

SELL 1390.38

SELL 1393.29

SELL 1396.03

SELL 1398.68

SELL 1402.34

SELL 1319.82

SELL 1229.29

Dow Jones Industrials

SELL 13068.82

SELL 13089.43

SELL 13106.86

SELL 13122.28

SELL 13149.03

SELL 12480.73

SELL 11829.11

NASDAQ Composite

SELL 2985.64

SELL 2993.24

SEL L3000.16

SELL 3008.96

SELL 3020.27

SELL 2835.67

SELL 2616.71

Value Line Index

SELL 2907.90

SELL 2916.18

SELL 2923.56

SELL 2932.91

SELL 2945.71

SELL 2972.55

SELL 2649.82

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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