S&P 500 tracing out possible short-term bull flag

Pause before the rise?

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

Market Snapshot for session ending 09-12-12

 

Last

Day Change

%Change

S&P 500 Index

1436.56

+2.99

+.21%

Dow Jones Industrials

13333.35

+9.98

+.07%

NASDAQ Composite

3114.31

+9.78

+.32%

Value Line Arithmetic Index

3087.21

+14.31

+.47%

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:

  • Small gains Wednesday propelled S&P 500 (and Emini futures contract), Dow Jones Industrial Average, and Value Line index to new short to intermediate-term highs. NASDAQ Composite continues to lag.
  • Trading volume faded .2% Wednesday while Average Price per Share was down 35 cents to $60.94. AVP remains below its best level ($61.48) made back on March 15.
  • Short-term trend remains positive and S&P 500 would need to sell below lower edge of 10-Day Price Channel (1401.36 through Thursday) to suggest new Minor Cycle negative.
  • Intermediate trend remains positive until lower edge of 10-Week Price Channel (1344.26 through September 14).
  • Daily MAAD was positive Wednesday with 13 issues higher and 7 lower. Daily MAAD remains below its July 3 peak, but only needs another 7 positive issues to better that high. Even such strength would leave Daily MAAD well below its March high, despite higher S&P 500 prices subsequent to that peak.
  • Daily CPFL was negative by 1.16 to 1 Wednesday while Daily CPFL Ratio remains moderately “Overbought” (1.60). CPFL has been unable to overcome first resistance at April 2012 resistance highs.
  • Cumulative Volume (CV) in S&P 500 rallied above August and April highs last week, but CV in S&P Emini has so far failed to confirm cash.

Market Overview – What We Think:

  • Wednesday’s strength in S&P 500, Dow, and Value Line index to new short to intermediate-term high was bullish. In fact, S&P 500 could be tracing out last elements of “bull flag” prior to further gains.
  • Fly in bullish ointment remains developing short-term ‘Overbought” conditions and failure of all of our key indicators (MAAD, CPFL, CV in S&P Emini, and short-term Momentum) to confirm price strength.
  • With S&P 500 only having gained 4.9% since May 2011 high (1370.58), we continue to wonder if market risk in face of indicator deterioration is worth longer-term exposure.
  • From long-term perspective, nothing but strength above October 2007 S&P 500 high (1576.09) would give this market a bullish imprimatur equal to market strength experienced from 1994 through mid-1999 when prices and indicators were in synch.
  • Since 2000 longer-term rallies by market have become increasingly labored relative to indicator performance, especially considering fact market is entering time of year that has proven to be historically vulnerable -- think 1929, 1987, and 2007.
  • Ongoing negative divergence by MAAD on both Daily and Weekly cycles reflects fact Smart Money has been looking askance at equities on both trends for some time. Current negative MAAD divergence is largest we have seen since October 2007.

cumulative, volume, s&p

cumulative, volume, emini

Index

Daily / Weekly / Monthly Stops

Weekly

Monthly

 

9/10

9/11

9/12

9/13

9/14

9/14

9/30

S&P 500 Index

SELL 1402.83

SELL 1401.37

SELL 1401.05

SELL 1401.36

SELL 1406.77

SELL 1344.26

SELL 1256.02

Dow Jones Industrials

SELL 13055.15

SELL 13035.17

SELL 13027.36

SELL 13027.39

SELL 13068.99

SELL 12680.65

SELL 12029.08

NASDAQ Composite

SELL 3053.55

SELL 3050.95

SELL 3052.75

SELL 3055.71

SELL 3069.09

SELL 2879.61

SELL 2685.41

Value Line Index

SELL 2962.80

SELL 2959.50

SELL 2961.79

SELL 2965.54

SELL 2980.54

SELL 2819.41

SELL 2702.37

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