We also exclude “VIX” ETFs from the list. These vehicles are a bet on market volatility. Aside from the fact we have always had a problem with the VIX index as a reliable market indicator anyway, we do not think the VIX should be included in the 20 Most Actives series simply because it is not a “security,” regardless of its implied market bias.
Market Overview – What We Think:
- Intermediate Cycle continues to hold toward “Oversold” territory while underscoring upside potential.
- But there must be upside follow-through above late August and September high (1230.71–S&P 500) to confirm positive change in Intermediate Cycle. Otherwise recent strength must be viewed as merely another failed reflex rally in longer-term negative.
- With significant overhead looming from 1255 in S&P 500 up to May high (1370.58), market could continue to face major resistance.
- Additional fact that Cumulative Volume remains weaker than prices (S&P 500 and S&P Emini futures contract) could be sign market internals may falter.
- And fact that CPFL remains weak is possible evidence market sentiment, as measured by activity of options players, is still unfavorable on longer term.
- Even if strength on Intermediate trend continues to develop, it remains to be seen if major resistance (1255-1370.58—S&P 500) will be overcome.
On a final note, some have suggested we should exclude all ETF issues from our calculations. But since the number of ETF issues will continue to rise, to eliminate these vehicles from our data collection might ultimately leave us at the short end of the stick and with no recourse but to go back and recalibrate all historical Most Actives data since 1993. There is also the reality that the stock market is never static. Change comes and this time around ETFs are part of that change.
Back at Wall Street last week, strong gains across the board left the major indexes sharply higher by 4.87% in the Dow 30 to a whopping 7.63% in the Value Line Index. Given gains, it is all but certain that selling into the new short-term low (1074.77—S&P 500) on October 4 that was not confirmed by Momentum was the bottom of the intermediate-term decline which began after the early May Intermediate highs (1370-58—S&P 500).
Daily S&P 500 Index with Cumulative Volume
Weekly S&P 500 Index with Cumulative Volume
Adding to the bullish outlook, the NASDAQ Composite Index, a gainer by 7.6% last week, also broke above minor resistance at its September 20 intraday peak (2643.37) to underscore the market positive. MAAD which also gained and was above its September 20 plot high, was last within range of hitting a downtrend line stretching back to early March when the indicator began deteriorating in preparation for the decline that culminated in the August lows.