But there’s a caveat. While Friday’s rally appeared to have eclipsed most of the price weakness incurred earlier, market volume shrank on strength by nearly 22%. Short-term Momentum was last negative in the Dow 30 and NASDAQ Composite while maintaining a positive toehold in the S&P 500 and Value Line index by inches. And Daily MAAD, our gauge of Smart Money on the near-term, took solid hits Wednesday and Thursday, but did not respond to the same extent as did prices on the upside on Friday while it remains below a defined short-term uptrend line stretching back to the December low. CPFL popped to a new short to intermediate-term high last week, but that peak was reached on Tuesday with only marginal recovery over the next three sessions.
Daily S & P 500 with Cumulative Volume (CV)
Weekly S & P 500 with Cumulative Volume (CV)
What should also be a concern to the bullish camp is the fact that last week’s selling put a crack in the dike. While buyers were waiting just below the market after Wednesday’s and Thursday’s selling, the fissure is still visible. Nothing but a reversal of the currently and probably newly negative short-term trend and then new short to intermediate-term highs (above 1530.94—S&P 500) will put this market back onto its upside track. There is also another reality. The larger Intermediate Cycle that has been underway since market lows were made November 16 (1343.35—S&P 500) is historically “Overbought” and last week’s selling did nothing to erase that condition. There is also the fact that the Major Cycle trend also remains historically “Overbought.” The last time the long-term trend was deeply “Oversold” was into the lows of March 2009 with a brief pullback in our Trading Oscillators toward “Neutral” in October 2011. That condition was preceded by the “Oversold” lows made in late 2002 and July 1982.