Stock market faces moment of decision: Break or hold

Stock index, chart, technical analysis

Market Overview – What We Know:

• Major indexes closed within range of even Thursday. Value Line index rallied to new all-time closing high. None of other indexes bettered recent short and intermediate-term resistance highs.
• Trading volume was up 4%.
• All cycles remain positive and “Overbought.”
• Short-term negative would be suggested if S&P 500 declines below lower edge of 10-Day Price Channel (1500.52 through Friday). Intermediate trend turns negative below 10-Week Price Channel (1406.37 through Friday).
• Daily MAAD was up a tick Thursday, but indicator remains below new short-term high reached Tuesday. Daily MAAD remains below intermediate resistance made last March 20. Ten issues were positive and 9 were negative Thursday while Daily MAAD Ratio was marginally “Overbought” at 1.37.
• Daily CPFL rallied to new short to intermediate-term high Thursday. Daily CPFL Ratio marginally “Overbought” at 1.41.
• Cumulative Volume (CV) continues to under perform pricing in all of major indexes.

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 be last stage of short-term rally begun December 28 and intermediate-term uptrend begun November 16. It seems reasonable to assume prices cannot continue higher indefinitely without correction.
• 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 statistical 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.

Next page: Indicator review