Overbought market remains range bound near-term

Markets gain on rising volume

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

Market Snapshot for session ending 09-20-12



Day Change


S&P 500 Index




Dow Jones Industrials




NASDAQ Composite




Value Line Arithmetic Index




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:

  • Small gains were posted by major indexes Wednesday.
  • All trends including short, intermediate, and major remain positive, but “Overbought.”
  • NYSE trading volume rose a little under 2% Wednesday and Average Price per Share sank 28 cents to $61.87.
  • Minor Cycle negative would be suggested if S&P 500 sinks below lower edge of 10-Day Price Channel (1423.33 through Thursday). Intermediate trend remains positive until lower edge of 10-Week Price Channel (1356.50 through September 21).
  • Daily MAAD was higher Wednesday with 14 issues positive and six negative. Indicator remains below interim peak made last Friday and is still holding above July 3 high, but remains well below March 20 peak, despite higher S&P prices. Daily MAAD Ratio was last toward “Overbought” territory (1.83).
  • Daily CPFL was positive Wednesday by 1.50 to 1 and reached another new short to intermediate-term high on Cumulative basis. Daily CPFL Ratio was “Overbought” at 2.76.

Market Overview – What We Think:

  • Continued “backing and filling” price action in S&P 500 leaves us with an uneasy feeling about viability of lingering positive in short-term trend.
  • Over past five sessions S&P 500 has been tracing out potential intraday Head and Shoulders pattern via more sophisticated Trade Volume bar chart with downside measured move implications. Wednesday’s feeble rally may have completed “Right Shoulder” of pattern and overnight selling Wednesday evening below potential “Neckline” at 1456 could mean possible downside follow-through toward 1437 in S&P Emini. That level just happens to correspond with zone of interim support and, depending on time it might take prices to get there, could coincide with lower edge of 10-Day Price Channel in Emini (1421.27 through Thursday).
  • All of this is in wake of attainment of short-term measured move target via small bull “flag” last week. Short-term “Overbought” conditions could make any further gains from current levels difficult.
  • 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.
  • 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

emini, cumulative, volume

Index Daily / Weekly / Monthly Stops Weekly Monthly








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.

Next page: Indicator review

Page 1 of 2 >>
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome