Stock market volume higher on possible key reversal

Dow reverses, while S&P 500 comes close

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

Market Snapshot for session ending 08-21-12

 

Last

Day Change

%Change

S&P 500 Index

1413.17

-4.96

-.35%

Dow Jones Industrials

13203.58

-68.05

-.51%

NASDAQ Composite

3067.25

-8.95

-.29%

Value Line Arithmetic Index

2996.93

-2.47

-.08%

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:

  • Major indexes rallied early Tuesday with S&P 500 bettering April 2 resistance high (1422.38) with quick move to 1426.68 before reversing to downside mid-morning.
  • Initial upside action was mimicked by Dow 30, NASDAQ Composite, Value Line index, and Russell 2000, but none of those majors bettered resistance highs.
  • In fact, action in S&P 500 and Dow 30 looked much like “Key Reversal Day” with only exception being that S&P Open merely equaled previous day’s close. But S&P 500 did reach new high and closed below Monday’s low. Dow 30 met all of criteria for KRD including Open above Monday’s close.
  • NYSE trading volume increased nearly 17% on market negativity. Average Price per Share was down 14 cents to $59.54. Highest recent AP/S was $61.48 on March 15.
  • Short-term trend remains positive until lower edge of 10-Day Price Channel (1396.03 through Wednesday). 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 has confirmed none of new highs made over past several sessions.
  • Our proprietary Trading Oscillators remain positive, but “Overbought,” on both Minor and Intermediate Cycles.
  • Daily MAAD was negative by 9 to 11 Tuesday while MAAD Daily Ratio was moderately “Overbought” at 1.20. Daily MAAD continues to hold below peak made July 3.
  • CPFL was negative Tuesday by 2.27 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 after S&P 500 eked out marginally higher high above its April 2 peak, while also reflecting possible Key Reversal Day in S&P 500 and Dow 30, may have capped rally 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, the market for several weeks. With that disparity in place, odds will continue to suggest short-term high, and possibly Intermediate peak, are imminent if they have not already been reached via Tuesday’s price action.
  • 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

stock index, cumulative, volume

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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