Stock market calm before more buying -- or before storm?

Stock index, chart, technical analysis

Market Snapshot for session ending 09-18-12

Market Overview – What We Know:

• Major indexes closed mixed Tuesday and within range of last Thursday’s final levels in wake of strength that moved prices to targeted upside levels on Minor Cycle.
• NYSE trading volume declined nearly 5% Tuesday compared to Monday’s levels. Average Price per Share gained 22 cents to $62.15.
• All cycles including Short, Intermediate, and Major remain positive, but “Overbought.”
• To suggest Minor Cycle negative, S&P 500 must sell below lower edge of 10-Day Price Channel (1419.21 through Wednesday). Intermediate trend remains positive until lower edge of 10-Week Price Channel (1356.50 through September 21).
• Daily MAAD was flat Tuesday with 10 issues higher and 10 lower. Daily MAAD Ratio was moderately “Overbought” (1.65). Daily MAAD advanced above July 3 resistance high last Thursday, but remains well below March 20 high.
• Daily CPFL was positive Tuesday by 3.4 to 1 and reached new short to intermediate-term high on Cumulative basis. Daily CPFL Ratio was “Overbought” at 2.89.

Market Overview – What We Think:

• Following last Thursday’s price high in S&P 500 (1474.51) and attainment of short-term measured move target from small bull “flag,” it remains to be seen if that intraday high was top of short-term rally or merely a point of relative quiet prior to further buying.
• Short-term “Overbought” conditions could make any further gains from current levels difficult, however.
• 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 strength, 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.

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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