Market mixed on lingering short-term positive sentiment

Stock market chart

Market Overview – What We Know:

• Major indexes closed mixed Wednesday with S&P, NASDAQ Composite, and Value Line index trading to new short to intermediate-term highs. VAY rallied to new all-time closing high.
• Trading volume rose 5% compared to Tuesday’s levels.
• Minor, Intermediate and Major Cycles remain positive, but historically “Overbought.”
• Short-term negative would be suggested in S&P 500 with weakness below lower edge of 10-Day Price Channel (1498.41 through Thursday). Intermediate trend turns negative below 10-Week Price Channel (1406.37 through Friday).
• Daily MAAD rallied to best level Tuesday and pulled back slightly Wednesday. Indicator was last at best level since last April when S&P was quoted near 1415, and since November lows, but has yet to better intermediate resistance made last March 20. Nine issues were positive and 11 were negative Wednesday while Daily MAAD Ratio was marginally “Overbought” at 1.25.
• Daily CPFL moved higher to new short to intermediate-term high Wednesday with Daily CPFL Ratio marginally “Overbought” at 1.20.

Market Overview – What We Think:

• As waiting game persists with S&P 500 moving incrementally higher, net, in face of “Overbought” conditions on all cycles suggestion lingers that some corrective action could soon develop on at least smallest short-term cycle.
• It remains to be seen whether or not major indexes will have the power to overcome long-term Cumulative Volume resistance, or if developing strength could prove to last stage of short-term rally begun December 28 and intermediate-term uptrend begun November 16. It seems likely prices cannot continue higher indefinitely without a correction.
• 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 endgame since upside targets have been met.
• Longer-term lingering weakness in MAAD, CPFL, Cumulative Volume, and Momentum, since spring 2011 highs is an indication market has not had technical underpinnings evident in first part of bull market from March 2009 to May 2011. Nothing but new highs by all our key indicators, an unlikely event, would erase that technical skepticism on longer term.

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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