Stock market fades Monday as old resistance still an issue

Stock index, chart, technical analysis

Market Overview – What We Know:

• Small losses were registered by major indexes Monday.
• Market volume contracted by about 2.5% as compared to last Friday’s levels.
• Short-term trend remains positive and S&P 500 must sell below lower edge of 10-Day Price Channel (1412.70 through Tuesday) to suggest Minor Cycle negative. Intermediate Cycle remains positive until lower edge of 10-Week Price Channel at 1385.21.
• Daily MAAD was marginally lower Monday with 8 issues positive and 12 negative. Indicator remains below December 20 short-term high, despite fact S&P bettered equivalent level in subsequent action. As a consequence, short-term negative divergence persists. Daily MAAD Ratio was last toward “Neutral” at .91.
• Daily CPFL was positive Monday by 1.34 to 1 and rallied to new short-term high. Daily CPFL Ratio remains “Overbought” at 2.45.

Market Overview – What We Think:

• While short-term trend in S&P 500 remains positive, index continues to have problems with line of resistance created back in September. Although S&P closed at best levels since December 2007 last week, none of our key indicators has confirmed that move.
• Fact that Daily MAAD remains 50% below Intermediate high made back in March and did not underscore S&P strength to new short-term high over past several days is not overwhelming vote of confidence for continuation of rally.
• Cumulative volume also continues to amplify fact market pricing does not have required positive underpinnings.
• Even if S&P had bettered September highs, index would be nowhere near overcoming October 2007 peak at 1576.09.

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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