Stock indexes up, technical indicator hits new minor high Monday

Stock index, chart, technical analysis

Market Overview – What We Know:

• Major indexes posted strong gains Monday, but none rallied to new short-term highs above December 12 intraday peaks (1438.59—S&P 500).
• Overall market trading volume rose 7% compared to last Friday’s levels.
• Minor Cycle uptrend initiated after November 16 lows (1343.35—S&P 500) remains intact and S&P would need to sell below lower edge of 10-Day Price Channel (1409.72 through Tuesday) to suggest end to that trend and beginning of Minor Cycle negative.
• Intermediate Cycle remains negative until S&P 500 moves above upper edge of 10-Week Price Channel (1437.85—S&P 500 through December 21).
• Daily MAAD was rallied to new short-term high Monday with 16 issues positive and 4 negative. Daily MAAD Ratio remains “Overbought” at 1.87. Despite new near-term high, indicator holds well below major resistance peak reached back on March 20.
• Daily CPFL was positive Friday by 1.86 to 1 with Daily CPFL Ratio was near “Neutral” at 1.05.
• 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 that major indexes were positive Monday was encouraging from a bullish point of view, given increasing volume and new short-term high in Daily MAAD. But since none of indexes reached new near-term highs (above 1438.59—S&P 500), whether or not Minor Cycle is sustainable remains key question in face of near-term “Overbought” levels.
• Lacking such action and fact larger Intermediate Cycle remains negative, we must continue to view all short-term strength as mere “return action” in larger cycle negative.
• Underlying longer-term concerns is fact that Cumulative Volume has not only failed to keep pace with index pricing since November 16, but CV has remained relatively weak for months.
• Nothing but strength above September 14 major resistance high (1474.51—S&P 500), would re-assert Major Cycle advance begun in March 2009.

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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