S&P 500 higher Wednesday, but lateral move still evident

Stock index, chart, technical analysis

Market Overview – What We Know:

• Small gains in major indexes Wednesday did not eliminate lateral pricing tendency that has persisted in market for past several sessions.
• Trading volume declined by about 2 ½% compared to Tuesday’s levels.
• S&P 500 remains positive on Minor Cycle and must sell below lower edge of 10-Day Price Channel (1420.87 through Thursday) to suggest Minor Cycle negative. Intermediate Cycle remains positive until lower edge of 10-Week Price Channel at 1385.21.
• Daily MAAD was marginally positive Wednesday with 11 issues higher and 9 lower with indicator continuing to hold below December 20 short-term high in spite of act fact S&P bettered equivalent level in subsequent trading. As a consequence, short-term negative divergence persists. Daily MAAD Ratio was last “Neutral” at 1.05.
• Daily CPFL was negative Wednesday by 1.37 to 1 and fell back slightly after rallying to new Minor Cycle High Tuesday. Level was best since November 16 general market short-term low and has moved CPFL within range of September 24 resistance high. Daily CPFL Ratio remains “Overbought” at 1.95 although upside extreme has lessened somewhat over past week.

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. And it remains to be seen if peak via intraday high made last Friday in S&P 500 (1467.94) with prove to be short-term high or merely part of a small bull flag with upside implications. Strength back above that high would prove bullish point.
• While 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 requires note of caution.
• Cumulative volume has also not been overwhelming on upside to suggest market underpinnings remain suspect.

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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