S&P closes Monday near even, uptrend reaches June low

Stock index, chart, technical analysis

Market Overview – What We Know:

• Despite intraday volatility, major indexes closed within range of even Monday.
• NYSE trading volume declined 33% relative to Friday’s levels, as Average Price per Share lost 62 cents to $61.18.
• After penetrating uptrend line (1430) stretching back to June low (1266.74) early Monday, S&P 500 finished session slightly above that same trend line. Short-term trend nonetheless remains negative with S&P needing to rally above upper edge of 10-Day Price Channel (1449.34 through Tuesday).
• Intermediate Cycle remains positive until lower edge of 10-Week Price Channel (1405.79 through October 26).
• Daily MAAD was positive Monday with 13 issues higher and 7 lower. Indicator remains just below uptrend line stretching back to June low. Daily MAAD Ratio was last toward “Oversold (.75). Given overall weakness of indicator since June, it wouldn’t take much to force indicator below June bottom.
• Daily CPFL was positive Monday by 1.77 to 1 with Daily CPFL Ratio still toward “Oversold” (.56). Indicator is nowhere near major resistance made week of February 25, 2011.
• Cumulative Volume (CV), especially in S&P Emini, continues to reflect broad lack of enthusiasm, especially since late August/early September.

Market Overview – What We Think:

• While S&P 500 remains positive on Intermediate Cycle, Minor Cycle is negative and index faces three near-term obstacles that must be overcome if the intermediate trend is to be re-asserted. First it must rise above short-term downtrend line (near 1468.00), then resistance high (1470.96) made October 5, and then September 14 intermediate high (1474.51).
• To prove bearish point on downside, S&P 500 must decline below rising uptrend line (near 1430) with follow through weakness below lower edge of 10-Week Price Channel (1405.79 through 10-26). Selling below latter point would likely terminate four-month-old-plus rally while suggesting new Intermediate Cycle negative.
• Short-term “Oversold” conditions have been surfacing as result of recent net market negativity, but it’s important to remember “Oversold” in early stages of new decline may be merely reflection of net “negativity” and not of buying opportunity.
• If another short-term bounce develops, a lack of indicator confirmation would be likely and would probably reveal a lot about internal strength of market on long term cycle.

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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