Stock market trading in narrow range for third week

Stock index, chart, technical analysis

Market Overview – What We Know:

• Major indexes, excepting NASDAQ Composite, posted marginal gains Monday.
• NYSE trading volume declined 19% as compared to Friday’s activity. Average Price per Share rose 20 cents to $61.40.
• Short-term trend remains negative unless S&P 500 rises above upper edge of trailing 10-Day Price Channel (1463.55 through Tuesday).
• Intermediate Cycle remains positive until lower edge of 10-Week Price Channel (1374.62 through October 5).
• Weekly MAAD was positive Monday with 14 issues higher and 6 lower. Daily indicator was last below July 3 peak while holding well below March 20 high to suggest Smart Money remains skeptical of this market.
• CPFL was positive Monday by 1.26 to 1, but remains below September short to intermediate high and is nowhere close to major resistance made week of February 25, 2011.
• Cumulative Volume (CV) in both S&P 500 and S&P Emini remains weaker than index pricing on both Daily and Weekly trends.

Market Overview – What We Think:

• With Minor Cycle stats now ranging from “Neutral” to “Oversold,” it remains to be seen whether or not market action over past two weeks will prove to be yet another corrective phase in Intermediate Cycle advance initiated after June lows, or something more negative on larger Intermediate Cycle.
• To resolve issue, S&P 500 must sell below rising uptrend line (last near 1410) with follow through weakness below lower edge of 10-Week Price Channel (1374.62). Weakness below latter point would almost certainly terminate four-month-old rally.
• In meantime, nothing but strength back above September 14 intraday high (1474.51) would re-assert Intermediate Cycle advance. Between here and there (uptrend/Price Channel and resistance) coin will continue to flip.
• Indicators such as Daily Most Actives Advance/Decline Line (MAAD) still suggest market has gotten way ahead of itself. Daily MAAD has come nowhere near overcoming March 20 resistance high even though indicator participated, albeit feebly, on upside after June lows. MAAD failure hints Smart Money has only been buying a bit more than it has been selling over past few months.

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.