With stocks near May highs, indicators dragging

Index Daily stops Weekly Monthly
7/11 7/12 7/13 7/14 7/15 7/15 7/13

S&P

Last
1343.80

%Chg
+.3%

SELL
1290.26

SELL
1299.53

SELL
1306.97

SELL
1315.04

SELL
1321.07

SELL
1306.61

SELL
1168.05

Dow 30

Last
12657.20

%Chg
+.5%

SELL
12132.45

SELL
12216.61

SELL
12290.17

SELL
12371.41

SELL 12432.29

SELL
12254.22

SELL
10906.74

NASD
Comp.

Last
2859.81

%Chg+1.5%

SELL
2701.29

SELL
2725.56

SELL
2746.65

SELL
2771.97

SELL 2789.78

SELL
2741.42

SELL
2439.35

Val. Line

Last
3087.20

%Chg
+.7%

SELL 2949.98

SELL 2971.55

SELL
2989.50

SELL
3009.16

SELL
3024.72

SELL
2980.25

SELL
2584.50

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.

New index highs could follow. We must offer that as a possibility, given the market drift over the past two weeks. But we are less concerned with whether the market makes new highs or not than we are focused on what these key indicators do from here on. Either they will also make new highs or they will not. If index prices rally to new highs and CV, CPFL, and MAAD confirm that action by following suit then the bull trend will be re-asserted in full. Or the indexes make new highs and the indicators fail to confirm. Or there is another possibility – prices and indicators fail to make new highs and selling pressures re-assert themselves.

In sum, index prices gained fractions last week while Minor Cycle statistics have returned to "Overbought" territory. At the same time, our key indicators, CV, CPFL, and MAAD, have all improved over the past three weeks since the mid-June lows, but none are anywhere near making new highs. As a consequence, we suspect that index prices could fail anywhere this side of the May highs with indicator confirmation or, if new highs in prices do follow, our indicators would fail to follow to new highs. Such a negative divergence would suggest longer-term problems for the stock market similar to the 2000 and 2007 highs.

McCurtain Most Actives Advance/Decline Line (MAAD)

MAAD using Daily data attempted to improve last week, but after four days of trading the indicator was marginally lower on the week and continues to look weak despite strength by the major indexes back toward the May highs. In fact, MAAD has already declined below its Intermediate Cycle uptrend line that stretches back to the July 2010 lows. But it’s also true that the Weekly MAAD Ratio has dipped into deeply "Oversold" territory to suggest that both the indicator and the broad market could be in a zone of "opportunity." Question is, how long will that opportunity last and how much more "Oversold" could the indicator get before reversing to the upside?

Underscoring both MAAD’s shorter-term struggles and its longer-term outlook, the fact lingers that Smart Money has not been enamored of this market for some time. We wonder how much longer that disenchantment will continue.

Click charts to enlarge

Next page: CPFL indicator charts

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