Market higher as 2012 closes, near-term looking stronger

Stock index, chart, technical analysis

Market Overview – What We Know:

• On last day of trading year, major indexes posted strong gains Monday.
• Market volume rose 35% compared to last Friday’s levels, but activity remained below normal.
• Despite Monday’s strength, short-term trend remains negative with S&P 500 continuing to hold below upper edge of 10-Day Price Channel (1439.28 thorough Wednesday).
• Intermediate Cycle remains negative with S&P remaining below upper edge of 10-Week Price Channel (1426.37 through January 4). But margin of negativity with improving short-term trend is fading.
• Daily MAAD was decidedly positive Monday with 19 issues higher and none negative. One was unchanged. Daily MAAD Ratio was last near “Neutral” at 1.04.
• Daily CPFL was sharply positive Monday by 8.5 to 1. Daily CPFL Ratio remains “Overbought” at 2.80.

Market Overview – What We Think:

• Monday’s strong gains, despite lower than normal volume, have left window open for a continuation of gains. Strength has occurred coincident with “Neutral” to slightly “Oversold” near-term conditions and our Call/Put Dollar Value Flow Line (CPFL) popped to a new short-term high Monday on heavy options Dollar Value volume. While Daily CPFL Ratio is “Overbought,” direction of indicator is bullish.
• Also, given proximity of pricing to December 18 S&P high (1448.00), we cannot rule out possibility weakness over past several sessions has merely been corrective in nature.
• But until S&P 500 is able to rally above September high (1474.51), long-term trend initiated in March 2009 remains in doubt.
• Daily MAAD made new short-term high December 20, but indicator must continue upward and above March 20 resistance peak to suggest confirmation of long-term bull.

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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