Stock market rally puts S&P E-mini at all-time high

Stock index chart, technical analysis

Market Overview – What We Know:

• All major indexes rallied to new short to intermediate-term highs Tuesday. S&P 500 has yet to better October 12, 2007 all-time closing high at 1561.80, but continuous contract on S&P Emini has hit new all-time close as did Value Line index. NASDAQ Composite was last at best level since November 2000.
• Market volume declined just under 10% compared to last Friday’s levels.
• All cycles remain positive and “Overbought.”
• If S&P 500 sells below lower edge of 10-Day Price Channel 1505.78 through Wednesday), a new short-term negative would be suggested. Intermediate trend turns negative below lower edge of 10-Week Price Channel (1419.11 through Friday).
• Daily MAAD rallied to new short-term high Tuesday, but has yet to overcome intermediate-term resistance made last March 20. Daily MAAD Ratio was last moderately “Overbought” at 1.39.
• Daily CPFL rallied to new short to intermediate-term high Tuesday. Daily CPFL Ratio moderately “Overbought” at 2.19.

Market Overview – What We Think:

• Waiting game persists as S&P 500 continues to work higher, net, in face of “Overbought” conditions on all cycles. It is likely 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 resistance plots, most of which were created in early 2011, 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 a 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.

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