Major stock indexes near flat; indicators struggle

Whichever question is answered first, it’s a virtual certainty that neither bull nor bear has made any money on a Buy and Hold basis since mid-February, using the major indexes as benchmarks. That truth may demand its own prayer.

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.

McCurtain Most Actives Advance/Decline Line (MAAD)

MAAD on the daily cycle perked marginally higher four out of the five sessions last week but, despite strength, all the indicator has done is return to the bottom side of what appears to be a "bear flag" stretching back to the indicator’s March 22 plot lows (see chart). While it’s possible further market rebounding could cause MAAD to work back into the midst of the bear flag, we suspect that the upper boundary of the formation will not be breached. That failure would not be a good omen for index pricing.

Moreover, what is most troubling about the performance of MAAD since the indicator reached plot highs back on March 3 and nearly three months ago is that it failed to confirm any of the strength into the early May index highs. That negative divergence suggests that Smart Money has been selling into strength.

Click charts to enlarge

McCurtain Call/Put Dollar Value Flow Line (CPFL)

Daily Cycle CPFL data on a cumulative basis sold down to new Short-term lows last week and last Friday. The indicator remained under selling pressure all five sessions and despite three days on strength last Wednesday through Friday in the major indexes. That upside failure by CPFL suggests options players remain uncertain if not outright unconvinced of this market’s ability to initiate and sustain a meaningful rally.

There is also the fact that CPFL has remained in a marginally deteriorating mode since its February 25 plot highs and in spite of strength to new highs by the major indexes. Clearly, the bullish camp needs to reassert its case, at least in terms of how options players see the market.

Click charts to enlarge

Conclusion

The major market indexes closed within fractions of even last week. The S&P, Dow 30, and NASDAQ Composite were all a touch negative (-.16%, -.56%, and -.23%, respectively) while only the Value Line index was a gainer, but by only .22%.

Prices were higher three of last week’s five sessions, but volume was unimpressive. And while the Short-term Cycle has dipped into "oversold" territory, all of our key indicators including Momentum, Cumulative Volume, MAAD, and CPFL on all cycles remain lackluster.

But because the Intermediate Cycle remains positive, albeit by a toehold, we still cannot rule out the possibility this market could make yet another attempt at the upside, a move which in all probably would be yet another unconfirmed and poor quality advance.

MAAD data for past 30 Weeks* CPFL data for past 30 Weeks

*Note: All data is for calendar week ending on Friday even though ending date may be a holiday.
Unchanged issues in MAAD calculations are not counted.

MAAD data for past 30 days**　　　　 　CPFL data for past 30 Days

**Note: Unchanged issues are not counted.

Robert McCurtain is a technical analyst, market timer and private investor based in New York City. He is a member of the Market Technicians Association and can be reached at traderbob@nyc.rr.com. If you would like to read more about how the CPFL is constructed, read a Futures article on the concept. This will take you to the MAAD article.