Equities near decision point on three-year bull move

Market Snapshot:

 

Last

Week Chg

Week %Chg

S&P 500 Index

1362.16

+27.14

+2.03%

Dow Jones Industrials

12880.09

+239.31

+1.89%

NASDAQ Composite

2935.05

+42.63

+1.47%

Value Line Arithmetic Index

2894.52

+74.09

+.2.62%

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

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

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

           

Last week was one of those times that will fuel the perpetual argument as to whether or not “news” moves stock market prices. Last Thursday, Eurozone leaders fashioned a deal relating to Eurozone debt and a coincident banking crisis on the heels of an announcement by the U.S. Supreme Court that erased some of the uncertainties about the constitutionality of Obamacare. Once S&P 500 prices made intraday lows Thursday near 2:30 pm EDT, the broad market rallied and the S&P tacked on over 17 points into the close. There was a pullback as evening trading began and toward 7 pm prices in S&P 500 Emini futures began to rally higher with sharp gains toward 11 pm. Overnight, into the U.S. opening, and over the course of trading Friday, buying persisted with the S&P ultimately adding 33.12 points on the day with the Dow Jones Industrials up 277.83. Were prices news driven? Maybe. Or was that end-of-week gain merely an extension of a rally begun after the June 4 lows (1266.77—S&P 500? The rally was briefly interrupted by a pullback from June 19 (1363.46—S&P 500) through June 25 (1307.27—S&P 500) and could now play out with more buying toward a near-term upside measured move target toward 1405—S&P 500.

Market Overview – What We Know:

 

  • Major indexes were positive last week, spurred largely by sharp rally last Friday.
  • Trading volume on NYSE shrank by nearly 12% on week with even less volume anticipated in upcoming week in response to July 4 holiday.
  • Short-term trend reversed to positive via Friday’s buying, while Average Price per Share added $1.45 to $58.16 on week. Highest recent Average Price per Share occurred back on March 15 at $61.48.
  • Intermediate Cycle remains negative, but buying above upper edge of 10-Week Price Channel (1368.93—S&P 500) through July 6 would suggest possible end of pullback begun after April 2 S&P intermediate high at 1422.38.
  • MAAD Daily Ratio was last plotted at 1.07 just above “Neutral.” At June 4 low Daily MAAD Ratio was deeply “Oversold, (.71), which means if market is entering new short-term rally phase, MAAD Daily Ratio will be beginning rally from a much higher level and could reach “Overbought” territory sooner.
  • Daily MAAD was positive Friday with 14 issues higher and 5 lower. With Weekly MAAD, however, there were only 11 issues higher with 9 lower.
  •  Daily CPFL was positive Friday by 2.708 to 1 while Weekly CPFL was positive by 4.708 to 1.
  • Cumulative Volume (CV) reached its best level since June 4 in S&P 500 last Friday, but CV in S&P 500 Emini futures contract continues to hold below first resistance made June 20. How far this short-term up move continues, if it does, could largely determine the staying power of the still negative Intermediate Cycle that has been underway since the S&P reached a peak (1422.28) back on April 2. If the upper edge of the 10-Week Price Channel (1368.93—S&P 500) is penetrated this coming week (through July 6), Intermediate Cycle negativity would be in doubt. But what is of far greater importance is the relationship of price gains to that April 2 high. Strength above that level would suggest a resumption of not only the advance initiated last October, but also of the long-term bull move initiated after the March 2009 lows. Last Friday’s rally was a surprise to the extent we had been looking for a continuation of short-term negativity because prices had been “teasing” to make a downside break of 10-Day Price Channels. S&P 500 prices were flirting with the lower boundary of the channel, which was actually rising, last Tuesday, Wednesday, and Thursday. Friday’s move and strength above the upper edge of the channel at 1348.11 erased any doubts as to the market’s short-term intentions. But there are some road signs to watch as this market drama unfolds in the sessions just ahead. Market Overview – What We Think:
  •  Back and forth action by major indexes just below and just above lower boundary of 10-Day Price Channels with a decisive lack of confirmation from short-term Momentum, our Daily MAAD Ratio and Trading Oscillators with negative readings left door open for Friday’s sharp gains, news inspired or not.
  • In fact, relative market “Neutrality” into Friday’s rally on heels of June 4 lows could mean market will undergo further gains without braking above April 2 S&P 500 peak at 1422.38.
  • Failure of Daily MAAD, so far, to confirm price strength and fact currently “Neutral” readings could quickly morph into short-term “Overbought” readings is all more reason to view short-term up trend with some skepticism. Upper edge of 10-Week Price Channels (1368.93—S&P 500) must be broken with follow strength above those late March/early April intermediate highs (1422.38—S&P 500).
  •  Strength above most recent intermediate highs would be required to suggest resumption of advance begun in March 2009. Nothing but strength above those same levels would re-assert bull trend.

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