Fragile stock market uptrend intact with indicator caveats

Market Snapshot for session ending 8-25-11:

 

Last

Net Change

%Change

S&P 500 Index

1159.27

-18.33

-1.56%

Dow Jones Industrials Average

11149.82

-170.89

-1.51%

NASDAQ Composite Index

2419.63

-48.05

-1.95%

Value Line Arithmetic Index

2491.06

-55.91

-2.20%

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

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:

  • Fragile uptrend connecting 8-9 (1101.54—S&P 500) and 8-22-lows (1221.09—S&P 500) remains intact.
  • Short-term Momentum is now fractionally positive.
  • Strength above 1187.75 in S&P 500 would cause index to fracture upper edge of defined 10-Day Price Channel that has remained negative since downside break below lower edge of Price Channel on July 27. Channel was challenged Wednesday via intraday action, but statistical resistance at 1194.98 contained strength and intraday reversal followed.
  • Strength above 8-17 intraday high at 1208.47 would put S&P prices above interior high point of recent reflex rally which faded last week back to 8-22 intraday 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 remains somewhat weaker.
  • Call/Put Dollar Value Flow Line (CPFL) declined to another short-term low Thursday for 16th day in row with negative ratio of 2.17 to 1 vs. Wednesday’s ratio of 1.39 to 1.
  • Most Actives Advance/Decline Line (MAAD) was negative Thursday by 7 to 13. MAAD could make new lows with ease.

Market Overview – What We Think:

  • With Minor Cycle Momentum now positive by a notch there is suggestion short-term trend could do a bit better. Perhaps back toward Head and Shoulders “Necklines” recently broken on downside (1255—S&P 500).
  • That S&P level would also coincide with a 60% retracement of recent losses. A 40% retracement would put S&P 500 back to 1204.
  • We suspect net odds for market over next couple of weeks are a bit more positive than negative by perhaps 55% top 45%.
  • Any strength that develops still should be viewed as countertrend action within context of larger cycle negativity. Think “Bear Flag” in larger cycle downtrend.
  • Fact that 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

7-15-11

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

8-23-11

19

1

8-23-11

47698

53693

8-24-11

14

6

8-24-11

40691

56428

8-25-11

7

13

8-25-11

42278

91822

*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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