Stock indexes likely have set minor cycle low

Market Snapshot for session ending 8-22-11:

 

Last

Net Change

%Change

S&P 500

1123.82

+.29

+.03%

Dow Jones Industrials

10854.65

+36.99

+.34%

NASDAQ Composite

2345.38

+3.53

+.15%

Value Line Arithmetic

2409.24

-.06

-.00%

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

Intermediate Cycle
(Medium trend lasting weeks to several months)
Negative

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

Market Overview – What We Know:

  • Index prices continue to hold above recent lows (1101.54—S&P 500).
  • Major resistance continues to hold at Head and Shoulders “Neckline” formations broken on downside on August 2. Levels coincide with about 60% retracement from recent lows.
  • Cumulative Volume (CV) continues to hold above August 8 interim low in both S&P 500 Cash Index and S&P 500 Emini contract, but Emini CV is somewhat weaker and could make new short-term low with ease.
  • Call/Put Dollar Value Flow Line (CPFL) declined to another new short-term low Monday and for 13th day in a row to reflect underlying options player skepticism. Put Dollar Volume was negative by 1.29 to 1, a modest improvement over Friday’s negative reading at 2.17 to 1.
  • Most Actives Advance/Decline Line (MAAD) improved fractionally Monday, but indicator remains close to recent low and could easily make new low.

Market Overview – What We Think:

  • Odds are increasing that short-term price low was put in place August 9 and that weakness late last week was a “test” of that bottom.
  • Even though we would look for some rebounding action IF recent low holds, we suspect ANY strength will prove to be nothing but a reflex rally in larger Intermediate Cycle negative.
  • Strength above declining upper edge of 10-Day Price Channel (1196.80-1187.75—S&P 500) in Weekly Summary Price Channel Table (“Daily Stops”) would suggest reversal of Minor Cycle to positive.
  • So long as CPFL and MAAD remain weak, we suspect any market strength should be viewed with suspicion.
  • Fact Cumulative Volume in S&P Emini is now below its March 2009 plot low is bad sign for broad market on longer term.

Click charts to enlarge

We are also updating the daily chart of both the Call/Put Dollar Value Flow Line (CPFL) and Most Actives Advance/Decline Line (MAAD) indicators every day and providing the most recent raw data so you can begin to plot the indicators on your own (see below). The weekly equity index indicator summary provides longer-term commentary based on these indicators.

The definitions of the indicators along with links to the original stories provide helpful background. Also, Robert describes these indicators in a recent I-Trade show presentation available online.

Click charts to enlarge

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

Date

NYSE Adv

NYSE Dec

Date

OEX Call $Volume

OEX Put $Volume

7-12-11

5

15

7-12-11

30530

98038

7-13-11

14

6

7-13-11

25452

90215

7-14-11

3

17

7-14-11

57503

73908

7-15-11

8

10

7-15-11

122830

41278

7-18-11

0

19

7-18-11

32600

70051

7-19-11

18

2

7-19-11

81963

36469

7-20-11

12

8

7-20-11

48958

36029

7-21-11

14

6

7-21-11

81985

37458

7-22-11

6

14

7-22-11

26566

23969

7-25-11

5

15

7-25-11

60431

29726

7-26-11

13

7

7-26-11

12740

29994

7-27-11

3

17

7-27-11

25922

98893

7-28-11

5

14

7-28-11

31161

42272

7-29-11

5

14

7-29-11

39764

73156

8-1-11

8

12

8-1-11

67404

100232

8-2-11

0

20

8-2-11

44027

98237

8-3-11

17

4

8-3-11

112076

111221

8-4-11

0

20

8-4-11

104998

400116

8-5-11

8

12

8-5-11

72140

258219

8-8-11

0

20

8-8-11

71137

673757

8-9-11

19

1

8-9-11

78912

329885

8-10-11

0

20

8-10-11

64575

242026

8-11-11

19

1

8-11-11

99447

182240

8-12-11

12

8

8-12-11

38879

74166

8-15-11

20

0

8-15-11

47561

81328

8-16-11

5

15

8-16-11

45058

46229

8-17-11

12

8

8-17-11

43194

65757

8-18-11

1

19

8-18-11

57314

307820

8-19-11

2

18

8-19-11

83277

180689

8-22-11

11

9

8-22-11

75476

97419

*Note: Unchanged issues are not counted.

Robert McCurtain is a technical analyst, market timer and private investor based in New York City. 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. Robert can be reached at traderbob@nyc.rr.com.

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