Market weakness threatens support, defined uptrends

Index

Daily stops

Weekly

Monthly

7/18 7/19 7/20 7/21 722 7/22 7/31

S&P

Last
1316.14

%Chg
-2.0%

BUY
1339.77

BUY
1339.48

BUY
1339.20

BUY
1337.45

BUY
1333.71

BUY
1330.80

SELL
1168.05

Dow 30

Last
12479.73

%Chg
-1.4%

BUY
12603.38

BUY
12616.77

BUY
12628.93

BUY
12628.17

BUY
12607.96

BUY
12560.83

SELL
10906.74

NASD
Comp.

Last
2789.80

%Chg
-2.4%

BUY
2829.46

BUY
2830.54

BUY
2832.95

BUY
2832.07

BUY
2824.95

BUY
2820.91

SELL
2439.35

Val. Line

Last
3003.00

%Chg
-2.7%

BUY
3073.24

BUY 3070.96

BUY
3071.16

BUY
3067.31

BUY
3055.60

BUY
3074.70

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.

In sum, after hitting statistical resistance in the form of the upper edge of 10-Week price channels while developing symmetry into what could prove to be the Right Shoulder of a potential Head and Shoulders top on the Intermediate Cycle, weaker index prices last week simply continued to underscore what could prove to be yet another distribution phase in the stock market. The proof of that assertion will be whether or not more selling develops and if such weakness would be enough to cause index prices to decline below the July 2010 and then the March 2009 price lows at what could prove to be the Neckline of the H&S top. The key to the current environment will be determined ultimately by a breakdown in prices with indicator confirmation. Lacking such action, we cannot rule out the possibility market action since February could prove to be merely a consolidation within the context of a still positive Major Cycle advance.

McCurtain Most Actives Advance/Decline Line (MAAD)

Net selling by Smart Money last week forced MAAD on both the Daily and Weekly cycles lower. Both cycles could make new lows relative to the June statistical lows with relative ease in the event only marginally more selling unfolds in the broad market.

Since the end of February MAAD has consistently failed to support market strength. The last time such a significant divergence relative to price action developed was into the market highs of October 2007. Then and now the lead time to the final highs was about four months. While history never repeats exactly the same, we find it interesting that the current negative divergence has continued to develop in MAAD while market prices have made virtually no headway on the upside for most of this year.

Click charts to enlarge

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