Stock market resistance bites again Wednesday after early gains

Stock index, chart, technical analysis

Market Overview – What We Know:

• Once intraday and new short-term highs were reached early Wednesday afternoon, major indexes sold sharply lower over remainder of session with follow-through losses into overnight trading.
• Market volume declined nearly 5% compared to Tuesday’s trading.
• Short-term trend remains positive with S&P 500 needing to sink below lower edge of 10-Day Price Channel (1403.07 through Thursday) to suggest reversal of near-term trend to negative.
• Intermediate Cycle remains positive until S&P 500 moves above upper edge of 10-Week Price Channel (1449.74 through December 14).
• Daily MAAD rallied to yet another new short-term high Wednesday. Indicator remains above resistance point made September 14 when S&P hit short to intermediate high at 1474.51, but holds well below major resistance high reached back on March 20. Daily MAAD was favorable by 2.33 to 1 Wednesday with 14 issues positive and 6 negative. Daily MAAD Ratio was “Overbought” at 1.90.
• Daily CPFL was negative Wednesday by 2.07 to 1 and Daily CPFL Ratio was moderately ‘Overbought” at 1.48.
• Cumulative Volume in S&P 500 and S&P Emini has continued to under perform S&P cash pricing since November 16 S&P 500 low (1343.35).

Market Overview – What We Think:

• Fact all of major indexes have rallied to new short-term highs has created positive uniformity on Minor Cycle. But in face of near-term “Overbought” conditions and fact index pricing must overcome major resistance at September/October highs, we continue to suspect recent strength could prove to be countertrend bounce in otherwise negative intermediate trend.
• And while improvement by Daily MAAD to new short-term high is indicative of better market underpinnings, given proximity of S&P pricing to upper edge of 10-Week Price Channel, and point to surpass to suggest intermediate-term to reversal, bulls are nevertheless required to prove their point.
• Until S&P rallies above September long-term resistance high (1474.51), any strength back toward that level could prove to be nothing but reflex rally into longer-term top.

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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