Market getting oversold on minor cycle

Bull flags forming?

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

Market Snapshot for session ending 09-04-12

 

Last

Day Change

%Change

S&P 500 Index

1404.94

-1.64

-.12%

Dow Jones Industrials

13035.94

-54.89

-.42%

NASDAQ Composite

3075.05

+8.09

+.26%

Value Line Arithmetic Index

2987.67

+14.64

+.49%

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

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

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

Market Overview – What We Know:

  • Mixed readings were reflected by major indexes Tuesday, but dominant theme was sharp recovery after early session losses.
  • NYSE trading volume shrank by about 14%, but Average Price per Share rose 56 cents to $59.37.
  • Short-term trend remains negative. S&P 500 must rally above upper edge of 10-Day Price Channel (1415.70 through Wednesday) to suggest positive reversal.
  • Intermediate Cycle remains positive and needs weakness below lower edge of 10-Week Price Channel (1331.11 through September 7) to turn negative.
  • Short-term Momentum in S&P 500 has moved back into negative territory and both of our Trading Oscillators were last negative. Intermediate Cycle remains positive, but “Overbought.”.
  • MAAD was negative Tuesday with 7 issues positive and 12 negative (1 unchanged). MAAD Daily Ratio was last holding toward “Oversold” territory (.85). Daily MAAD remains below its July 3 high despite higher S&P 500 prices into August 21 peak (1426.68).
  • Daily CPFL was marginally positive Tuesday at 1.12 and Daily CPFL Ratio was last “Oversold” at .66. Indicator continues to hold below April resistance highs.
  • Cumulative Volume (CV) in both S&P 500 and S&P 500 Emini futures contract remains below indicator highs made back in April, despite higher S&P 500 prices.

Market Overview – What We Think:

  • August 21 high in S&P 500 (1426.68) was likely short-term high, but it remains to be seen if that peak will prove to be best level of Intermediate Cycle uptrend in effect since June 4 lows (1266.74—S&P 500).
  • Problem for shorts and sellers is that each time market has backed off over past two weeks, new buyers seem eager to run prices back up. Because our short-term indicators have begun to exhibit “Oversold” characteristics, we cannot rule out possibility market is tracing out “bull flag” patterns in otherwise positive Intermediate Cycle uptrend. Nothing but serious price breakdown would reassert negative market tone.
  • With market entering that time of year that has proven to be historically vulnerable, think 1929, 1987, and 2007, recent highs will prove to be important deciding factors.
  • Ongoing negative divergence by MAAD reflects fact Smart Money has been looking askance at equities on both short and long term trends. Current negative MAAD divergence is largest we have seen since October 2007.
  • Resumption of negativity on Minor Cycle could threaten reversal of Intermediate Cycle positive and then long-term uptrend stretching back to March 2009 lows. Latter would almost immediately become an issue if Intermediate Cycle turns negative since long-term trendline is now approximately coincident with June lows (1266.74—S&P 500). In other words, if June lows are fractured odds would be good major advance since March 2009 is over.

cumulative, volume, s&p

cumulative, volume, emini

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

9/3

9/4

9/5

9/6

9/7

9/7

9/30

S&P 500 Index

BUY
1416.49

BUY
1416.10

BUY
1415.70

BUY
1414.48

BUY
1413.94

SELL
1331.11

SELL
1256.02

Dow Jones Industrials

BUY
13219.18

BUY
13204.12

BUY
13189.98

BUY
13168.81

BUY
13159.88

SELL
12566.91

SELL
12029.08

NASDAQ Composite

BUY
3078.14

BUY
3080.45

BUY
3082.61

BUY
3082.67

BUY
3081.99

SELL
2853.56

SELL
2685.41

Value Line Index

BUY
2994.24

BUY
2992.89

BUY
2992.64

BUY
2990.88

BUY
2988.60

SELL
2799.47

SELL
2702.37

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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