Stock market bias shifting from buyers to sellers

Stock market chart

Market Overview – What We Know:

• Major indexes finished session Thursday mixed with only Value Line index in positive territory.
• Trading volume rose 13% compared to Wednesday’s levels.
• All trends remain positive, but all, including Minor, Intermediate and Major Cycles, are historically “Overbought.”
• S&P 500 needs to sell below lower edge of 10-Day Price Channel at 1482.17 through Friday to suggest new short-term trend to negative. Intermediate trend turns negative below 1393.45 through Friday.
• Daily MAAD was negative Thursday with 6 issues positive and 14 negative. Indicator via Thursday’s negativity fractured small uptrend line stretching back to December 28 near-term low. Daily MAAD Ratio was marginally “Overbought” at 1.16.
• Daily CPFL was negative by 2.63 to 1 Thursday after hitting new short-term high Tuesday.
• Cumulative Volume (CV) in S&P 500 hit a new short-term high Tuesday and has backed off since then. CV action in S&P Emini an NASDAQ Composite has yet to confirm S&P cash on upside above September resistance.

Market Overview – What We Think:

• Trend under way since November lows in all of major indexes may be in endgame given “Overbought” conditions and simple fact prices cannot continue higher indefinitely without some retrenching.
• Wednesday’s weakness may have been beginning of at least short-term pullback after S&P tapped upside measured move target toward 1510 Wednesday (1509.94).
• If move since November lows turns out to be A-B-C rally with “B” leg pullback from December 19 to January 2, “C” leg rally could be in termination phase.
• While confirming movement in cash S&P CV to new short-term highs has been positive, failure of CV In S&P Emini and NASDAQ Composite means strength has been selective.
• Longer-term lingering weakness in MAAD, CPFL, Cumulative Volume, and Momentum, is an indication market could be on borrowed time. Nothing but new highs by all our key indicators, an unlikely event, would erase negative divergence.

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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