Stock indexes gain with MAAD, but volume deteriorates

Market Snapshot for session ending 8-29-11:

Market Overview – What We Know:

• Strength in S&P 500 Monday pushed bids above upper edge of 10-Day Price Channel (1180.02) and interim resistance created August 17 (1208.47) via Monday’s intraday high (1210.28).
• Strength in S&P 500 above Price Channel and first resistance signals confirmation of reversal of short-term trend to positive.
• Monday’s strength in S&P was not confirmed by Cumulative Volume which has yet to break above 8/15-17 resistance.
• Daily trading volume diminished, despite market strength.
• Daily MAAD rallied by 20 to 0 Monday and broke above mid-August interim resistance to confirm price strength.
• Daily CPFL declined to another new short-term low Monday with indicator registering negative readings for past 18 sessions. Indicator was negative Monday by 1.07 to 1.
• Short-term Momentum in S&P 500 is now moderately “Overbought” just above Neutral with Neutral readings now evident in both of our proprietary Trading Oscillators.
• First significant resistance holds at Head and Shoulders Neckline (1255) in S&P 500.

Market Overview – What We Think:

• S&P 500 could be working on “C” leg of A-B-C retracement which could allow bellwether to work back toward Head and Shoulders Neckline resistance at 1255.
• Fact that short-term Momentum and proprietary Trading Oscillators have returned to Neutral and better is indication market continues to unravel deeply “Oversold” conditions created during recent sharp decline.
• We continue to suspect any buying that develops will do so within context of still negative Intermediate Cycle and still challenged long-term uptrend.
• As expected upside volume continues to diminish on strength. This action is characteristic of bear move retracement.
• So long as market sentiment as measured by such indicators as CPFL remains poor, we think any strength that evolves could prove to be no more than weak bargain hunting/short-covering.

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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.

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

*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.