Stock market minor cycle weakens amid uptrend

Weekly Review: Slight upward bias emerges

Market Snapshot:

 

Last

Week Chg

Week %Chg

S&P 500 Index

1398.08

-10.39

-.73%

Dow Jones Industrials

13060.14

-151.90

-1.14%

NASDAQ Composite

3080.50

-11.07

-.35%

Value Line Arithmetic Index

3019.76

-46.48

-1.51%

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

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

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

Over the past two weeks the major stock market indexes have found it progressively difficult to make any headway on the upside. Each attempt has been followed by a small pullback and then another failed attempt. The end result has created a “stair step” effect with a slight upward bias as in the S&P 500, or the same effect with a downward tendency in the Value Line index. Contrary to both, the Dow Jones Industrial Average has moved up and down laterally.

Short-term pullbacks have not been particularly exceptional within the framework of the Intermediate Cycle advance that has been underway since last October’s lows. In fact there have been four or five short-term peaks since then with as many near-term lows. But every rally, great or small, eventually reaches an end. That certainty has caused to focus, for a number of reasons, on the potential importance of this short-term trend that has begun to succumb to selling pressures as they relate to the larger intermediate trend.

Market Overview – What We Know:

  • Losses last week in major indexes put larger Intermediate Cycle in jeopardy.
  • Minor Cycle underway for nearly a month is on verge of turning negative.
  • S&P 500 would have to better 1422.38 at April 2 intraday high to create new high for move and best levels since October 2011 lows.
  • Trading Volume declined 23% last week due to shortened trading week. Volume on NYSE was down 14% last Thursday.
  • Short-term trend is flirting with negativity as “Overbought” readings based on price correct toward “Neutral.” Intermediate Cycle based on Weekly index pricing remains “Overbought.”
  • MAAD Daily Ratio remains in “Oversold” territory (.80) and toward level that can coincide with short-term low.
  • To re-assert Intermediate Cycle, buying would now be required above upper edge of 10-Day Price Channel (1412.52—S&P 500 / Monday). Intermediate Cycle at lower edge of 10-Week Channel would be threatened with weakness below 1331.26 in S&P 500 (through April 13).
  • MAAD was negative Thursday with 9 issues positive and 11 negative.
  • Daily CPFL was negative Thursday by 2.17 to 1 and was holding just below new short-term high created April 3. But neither Daily nor Weekly series is anywhere near overcoming major resistance at February 2011 highs.

First, our Daily Most Active Advance/Decline Line indicator (MAAD) declined below a defined uptrend line last Wednesday stretching back to the mid-December lows. After peaking back on March 20, Daily MAAD failed to confirm any strength to slightly higher highs in the S&P 500. And while last Wednesday’s downside break was not decisive in terms of signaling a short-term reversal that will inevitably lead to a challenge of the Intermediate Cycle, it was nonetheless a warning.

Market Overview – What We Think:

  • Failure of market indexes to gain traction on upside over past two weeks is likely suggestion near-term trend is failing.
  • Extent to which Minor Cycle weakness will determine staying power of larger Intermediate Cycle that remains positive, but historically “mature.”
  • If buyers once again pick up “bargains” on weakness, however, as short-term “Overbought” conditions are eliminated, intermediate trend will remain viable and new highs for move could remain a possibility.
  • Possible clue to future market direction may rest in price of average share on NYSE. Despite recent short to intermediate new highs, highest recent average price ($61.48) was hit back on March 15. Divergence could be sign fewer and fewer issues are leading market upward.
  • Failure of Weekly MAAD to better 2011 highs, despite strength in major indexes above similar levels, is ongoing suggestion that internal strength of market has not been and is not what it should be.
  • Fact that Cumulative Volume (CV) remains weaker than index pricing relative to 2011 highs in S&P 500, Dow 30, and NASDAQ Composite underscores lack of strong participation in market over past several months.

Second, one of the two short-term Trading Oscillators we regularly follow is now negative with a second poised to follow suit. Underscoring the negative bias of those oscillators, short-term Momentum has dipped into negative territory for the first time since early March when the most recent near-term advance began.

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