Equity indexes sink to lows as indicators remain weak

Market Snapshot for week ending Aug.19:

Last

Week Chg

Week %Chg

S&P 500 Index

1123.53

-55.28

-4.6%

Dow Jones Industrials

10817.85

-451.17

-4.0%

NASDAQ Composite

2341.84

-166.14

-6.6%

Value Line Arithmetic Index

2409.30

-161.32

-6.2%

Minor Cycle
(Short-term trend lasting days to a few weeks)

Intermediate Cycle
(Medium trend lasting weeks to several months)

Major Cycle
(Long-term trend lasting several months to years)

Negative / Neutral

Negative

Neutral / Negative

Over the past 3 ½ months from the May highs to the recent lows, the S&P 500 Index lost 19.6%, the Dow Jones Industrial Average declined 17.6%, the NASDAQ Composite faded 19.2%, and the Value Line index lost a whopping 24.5%. And while the justifications for the decline are as numerous as there are issues on the NYSE, the fact is bulls have been losing money while, if they’ve been astute enough to be short, bears have been profiting.

Market Overview – What We Know:

  • Following some modest price recovery with deteriorating upside volume off of Aug. 9 interim bottom, index prices faded back toward recent lows (1101.54—S&P 500) late last week as prices confronted statistical resistance in form of defined Minor Cycle Price Channels (1211.17—S&P). Volume picked up on downside with market weakness last Thursday and Friday.

· CPFL declined to a new short-term low Friday with indicator registering negative readings for past 12 sessions. Friday’s CPFL Ratio was negative by 2.1 on a Dollar Value basis.

· CPFL is now below its long-term uptrend stretching back to March 2009.

· MAAD remains weak and could sink to new short to intermediate-term lows with ease.

· Weekly MAAD via last week's net weakness has finally dipped below its long-term uptrend stretching back to March 2009.

· Minor Cycle is deeply “Oversold,” Intermediate Cycle is negative and moderately “Oversold,” and Major Cycle remains positive and moderately “Overbought.”

· Cumulative Volume in S&P 500, Dow Jones Industrial Average, and NASDAQ Composite Index has declined to levels not seen since March/April 2009. CV in all three has declined below major supports put in place during July 2010.

Market Overview – What We Think:

· While major indexes remain above interim lows (1101.54—S&P 500) put in place August 9, stock market remains in precarious position in that several days of weak volume rally was easily reversed last week as prices approached statistical resistance at defined 10-Day Price Channels.

· Although we suggested resumption of selling last Thursday and Friday could prove to be merely a “test” of recent lows, ease with which prices continued lower is a concern, especially considering increase in downside volume.

· If major indexes decline to new lows in a move that is not confirmed by short-term Momentum, such action could be preliminary to a rebound. Second possibility could allow for rebound if prices fail to make new lows.

· We still do not think any strength will overcome “Neckline” resistance at breakdown point from recent Head and Shoulders Tops (1255--S&P) anytime soon.

· There is also fact that CPFL continues to deteriorate to new lows while MAAD is on verge of making new lows. Weakness in both underscores potential for a resumption of market weakness, despite near-term “Oversold” conditions.

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