Stock market negative, but oversold on minor, intermediate cycles

Weekly analysis: Bloom comes off the stock market rose

Stock index, chart, technical analysis Stock index, chart, technical analysis

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) Negative

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

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

Helped along by a reported $2 billion trading loss at J.P. Morgan last week (“Dude, are we long or short? Oops.”), the bloom came off of the stock market rose last week. The Minor Cycle gained more legs on the downside via weakness to new short-term lows. And selling below the lower edge of the 10-Week Price Channel in the S&P 500 negatively roiled the next larger Intermediate Cycle that has been positive since last October (1074.77—S&P 500). The S&P has been trending lower since April 2 (1422.38).

So, given a trend reversals on both the Minor and Intermediate Cycles, what can market players look forward to?

First, it’s important to note that the short-term trading ratios based on both price and varied indicator inputs have moved into “Oversold” territory. It’s also important to note that in the early stages of an Intermediate Cycle reversal, “Oversold” on the short-term cycle can stay that way for an extended period of time. In other words, the implied opportunity of the Minor Cycle is merely an illusion – the trend toward statistically negative readings, and “Oversold,” is merely reflecting the correct nature of the market that is heading lower and which is being propelled downward by the selling pressures from the larger Intermediate Cycle. The reverse can happen in a new intermediate uptrend –short-term “Overbought” conditions can persist and such readings do not necessarily suggest a selling opportunity.

Market Overview – What We Know:

  • Major indexes lost ground again last week as S&P 500 closed last Friday at its lowest level since short to intermediate-term selling began after April 2 high (1422.38).
  • Trading volume on NYSE increased just over 3% last week as prices sold lower.
  • Short-term trend is negative with Intermediate Cycle largely confirmed on negative front depending on index. Value Line remains weakest with Dow 30 the strongest.
  • All indexes were last below lower edge of 10-Week Price Channels, a very strong indication that trend since last October is over.
  • Normal 40% to 60% pullback of advance since October in S&P 500 could put index toward 1283-1213. If lower boundary is approached and holds as intermediate trend becomes “Oversold,” long-term trend since March 2009 would remain intact. Break below lower boundary and long-term uptrend line would be long-term bearish.
  • Weekly MAAD was negative last week with five issues higher and 15 lower. Weekly MAAD Ratio was toward Oversold” territory at .72. Daily MAAD was “Oversold” at .53 after Daily MAAD slightly fractured on Friday uptrend line stretching back to October low. Daily MAAD was last at S&P price equivalent of 1295.
  • Average Price per Share lost 89 cents last week to $57.02. Highest recent average price level occurred March 15 at $61.48.
  • Weekly CPFL was negative last week by nearly 2 to 1 with the indicator holding well below its April 9 short-term high. Both Daily and Weekly CPFL remain below long-term indicator resistance high put in place February 2011.
  • Cumulative Volume (CV) in both S&P 500 and S&P 500 Emini futures contracts declined to new short-term lows last week and to lowest levels since early February. Both CV indicators remain well below 2011 highs.

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