Oversold market on short-term cycle comes with caveats

In sum, the broad market as measured by the major indexes is about where it was at the first of this year. Net-net buy and hold investors haven’t made much for the past six months. While some near-term rebounding could soon develop, we continue to suspect that the internal dynamics of the market do not warrant optimism to the extent near-term "oversold" conditions will prove to be yet another setup for a resumption of the primary bull. How statistics respond to market improvement on the Minor Cycle and how quickly they move back to neutral/plus will determine the staying power of any rally which develops.

Index

Daily Stops

Weekly Monthly
6/20 6/21 6/22 6/23 6/24 6/24 6/30

S&P

Last
1271.50

%Chg
+.04%

BUY
1295.52

BUY
1292.97

BUY
1290.54

BUY
1286.65

BUY
1284.60

BUY
1349.12

SELL
1135.28

Dow 30

Last
12004.36

%Chg
+.43%

BUY
12160.90

BUY
12138.38

BUY
12115.81

BUY
12086.74

BUY
12078.50

BUY
12639.59

SELL
10638.30

NASD
Comp.

Last
2616.48

%Chg
-1.03%

BUY
2710.16

BUY
2700.17

BUY
2690.02

BUY
2677.92

BUY
2669.48

BUY
2839.91

SELL
2364.22

Val. Line

Last
2873.49

%Chg
+.32%

BUY
2940.46

BUY 2930.60

BUY
2922.47

BUY
2912.50

BUY
2906.82

BUY
3102.90

SELL
2495.04

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)

After hitting its lowest level on June 8 following the March 3 plot highs, Daily MAAD improved net last week to suggest that Smart Money has been "nibbling" equities as prices in the major indexes sold down to new short-term lows with the lowest level of the move last Thursday.

Unfortunately, MAAD on a cumulative plot basis remains below the longer-term uptrend stretching back to the July 2010 lows as the indicator continues to suggest that despite some small improvement over the past several days, the indicator remains net negative and still within the confines of what could prove to be a longer-term distribution top.

Nothing but strength back above the March highs would cause us to suggest that Smart Money has switched from net selling to net buying. And as we’ve noted often over the past few months, the last time that such a negative divergence developed between MAAD and index pricing was into the October 2007 highs.

Click charts to enlarge

McCurtain Call/Put Dollar Value Flow Line (CPFL)

Even though Call Dollar Value statistics using Daily CPFL data demonstrated net improvement last week, Put Dollar Value data remained net negative to cause the indicator to make new cumulative lows every session and to sink to a new low last Friday.

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