Stock market rallies, but Santa forgot the volume

Market Snapshot:



Week Chg

Week %Chg

S&P 500 Index




Dow Jones Industrials




NASDAQ Composite




Value Line Arithmetic Index




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

Intermediate Cycle
(Medium trend lasting weeks to several months)
Positive / Neutral

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

Awhile back we were looking forward to watching a highly touted college football game which was supposed to be a decisive contest at the end of the gridiron season. Turns out, however, that when the players came trouping out onto the playing field, nearly half of the first string on the favored team was out with injuries. At any rate, the top-ranked team was beaten by a lesser-ranked school.

We remember that game now, because it reminds us a lot of the current stock market in that a low volume rally is accounting for price gains in the major averages. Call that “B” team volume. Last Friday some of the post closing headlines made strength sound as if index prices had been pushed to the edge of nirvana. Well, not quite. In fact, only the Dow Jones Industrial Average was able to overcome its October 27 short-term high (12284.31). The S&P 500 has yet to follow suit while the NASDAQ and the Value Line Index are still way out of equivalent money.

Market Overview – What We Know:

  • Index prices posted gains last week on lighter pre-holiday trading activity.
  • Dow Jones Industrial Average bettered its October 27 intraday and short-term high at 12284.31 to its re-assert Intermediate Cycle positive, but S&P, NASDAQ, and Value Line index continue to fall short of similar resistance levels, NASDAQ and Value Line especially.
  • Short-term trend has moved back into positive territory following downside threat to rising uptrend line connecting October and November lows and trailing lower edge of 10-Week Price Channel (good to 1187.25 through December 30).
  • While strength in Dow 30 above minor resistance is encouraging, nothing but buying above October 27 intraday and short-term high at 1292.66 would re-assert Intermediate Cycle advance in S&P 500 begun after October lows for broad market which S&P tends to represent.
  • MAAD was positive last week by 19 to 1 with Weekly MAAD Ratio last holding near “Neutral.” Daily MAAD has been mimicking price action since October lows, but neither Daily or Weekly series looks as good as index pricing on longer-term.
  • CPFL was positive four of five sessions last week and week stats were higher by nearly 4 to 1.
  • On net longer-term basis, CPFL has remained consistently negative since February 2011 highs and could make new lows with ease. In front of the end of year holidays, options volume has been noticeably lighter than normal.
  • Cumulative Volume has remained in synch with broad market on near term, but continues to highlight severe downside negative suffered via early August selling into October lows.

We have alluded to the possibility lately that so long as the Intermediate Cycle initiated after the early October lows stays intact, there is a possibility bulls just might be able to overcome resistance up to the May highs (1370.58—S&P) and with enough buying could even push bids above those May highs. But…. And that’s the huge caveat here. Would any of our key indicators confirm such strength, given the fact they’ve been struggling to confirm even short-term strength? We doubt it. “Aye, there’s the rub,” as old Will once said.

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