Overbought stock market fades some short-term gains

Too far, too soon?

Bull, Bear, Market data Bull, Bear, Market data

Market Snapshot for session ending 09-17-12

 

Last

Day Change

%Change

S&P 500 Index

1461.19

-4.56

-.31%

Dow Jones Industrials

13553.10

-40.27

-.30%

NASDAQ Composite

3178.67

-5.27

-.17%

Value Line Arithmetic Index

3133.89

-25.81

-.82%

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) Positive

Market Overview – What We Know:

  • Stalling below last Friday’s intraday highs following last week’s run-up, all of major indexes lost ground Monday.
  • NYSE trading volume declined 26% compared to Friday’s levels and Average Price per Share lost 54 cents to $61.93.
  • All cycles including Short, Intermediate, and Major remain “Overbought.”
  • To suggest Minor Cycle negative, S&P 500 must sell below lower edge of 10-Day Price Channel (1415.01 through Tuesday). Intermediate trend remains positive until lower edge of 10-Week Price Channel (1356.50 through September 21).
  • Daily MAAD was net negative Monday with 5 issues positive and 14 negative. Daily MAAD Ratio was moderately “Overbought” (1.57). Daily MAAD advanced above July 3 resistance high last Thursday, but faded Monday and remains well below March 20 high.
  • Daily CPFL was positive Monday by 4.9 to 1 and reached new short to intermediate-term high on Cumulative basis. Daily CPFL Ratio was “Overbought” at 2.67.

Market Overview – What We Think:

  • Having fulfilled upside measured move requirements on short-term cycle, it’s possible last week’s high in S&P 500 (1474.51) could prove to be Minor Cycle top, considering fact short-term trend is also extremely “Overbought.”
  • But while strength last week with coincident gains by MAAD, CPFL, and CV to new short-term highs bolstered Minor and Intermediate Cycles, fact that all of our key indicators continue to hold well below early 2011 highs does nothing for positive flavor of long-term trend.
  • Short-term Momentum has also confirmed NONE of strength over past several weeks to suggest market, despite recent price gains, has lost some its upward impetus compared to earlier stages.
  • Nonetheless, Minor and Intermediate Cycles remain viable to extent both are still positive. We would first need to see negative reversal of short-term trend to suggest possible weakening of the larger intermediate.
  • In background it’s important to keep in mind fact market is entering time of year that has proven to be historically vulnerable -- think 1929, 1987, and 2007.

cumulative, volume, s&p

cumulative, volume, emini

 

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

9/17

9/18

9/19

9/20

9/21

9/21

9/30

S&P 500 Index

SELL
1411.16

SELL
1415.01

SELL
1419.21

SELL
1423.33

SELL
1431.43

SELL
1356.50

SELL
1256.02

Dow Jones Industrials

SELL
13103.90

SELL
13135.07

SELL
13175.42

SELL
13212.86

SELL
13283.83

SELL
12779.71

SELL
12029.08

NASDAQ Composite

SELL
3076.35

SELL
3081.85

SELL
3086.73

SELL
3093.47

SELL
3107.26

SELL
2906.06

SELL
2685.41

Value Line Index

SELL
2996.29

SELL
3010.24

SELL
3024.89

SELL
3038.31

SELL
3060.10

SELL
2843.10

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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