Stock market, like summer, is heating up on all cycles

Weekly Review: Price channels point direction for future price

Bull, Bear, Market prices Bull, Bear, Market prices

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) Positive / Neutral

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

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

The long, hot struggle continued last week. And by that we do not mean the heat wave that has affected a large part of the United States recently, and especially the East Coast where we are ensconced almost on top of our trusty, rattling air conditioner. No, we are referring to the conflict in the stock market that has been playing out for months.

On one hand we have index pricing that has been moving net higher since the March 2009 price lows (666.79—S&P 500) through the recent March/April highs (1422.38—S&P 500). Those who bought the index at the precise bottom and held until April 2 when the S&P 500 reached its peak gained 113% in just over three years. Via last Friday’s close that gain was holding at 103%. Which leads to the big question: “How much of that profit will be kept in the weeks and months ahead?”

And on the other hand….

From the June 4 low to the April 2 high the S&P 500 advanced 108.07 points for a gain of 8.5%, at least until last Friday when that gain was whittled back to 6.9%. Friday’s 12.90 point loss in the S&P 500 to 1354.60 (124.19 points in the Dow 30 to 12772.47) in that June 4/April context is noteworthy for a number of reasons. First, the Minor Cycle advance from June 4 unfolded in two parts that could prove to be an a-b-c rally with an upside target toward 1405—S&P 500. Second, there’s a problem with that measured move target, however, to the extent short-term Momentum has so far failed to “confirm” the “c” leg of the rally, which means the short-term advance may be running out of steam. Third, the market remains “Overbought” in terms of our short-term Trading Oscillators that have yet to give any ground on the statistical downside, which remains the market remains vulnerable on the near term cycle. And last, Daily MAAD broke below a short-term uptrend on Friday. The indicator had been improving since the June 4 low after retracing only about one third of its loss since the April high, whereas the S&P rallied back about one half.

Market Overview – What We Know:

  • Major indexes closed mixed last week with S&P 500 and Dow Industrials negative with small gains showing in NASDAQ Composite and Value Line index.
  • Short-term trend remains positive, as measured by S&P 500, but margin for error on downside is diminishing. Selling below lower edge of 10-Day Price Channel (1321.91—S&P 500 through Monday) would suggest end of uptrend begun after June 4 lows (1266.67—S&P 500).
  • Larger Intermediate Cycle trend remains negative, despite recent upside thrusts by index pricing. Sustained buying above upper edge of 10-Week Price Channel (1358.88—S&P 500 through July 13) would be required to reverse intermediate trend to positive.
  • NYSE volume declined last week by nearly 40% in response to July 4 holiday week. Average Price per Share rose 16 cents to $58.32 as compared to previous Friday.
  • Daily MAAD was negative Friday by 1 to 19 and broke downward through trend line stretching back to June 4 indicator low. Daily MAAD Ratio was stuck toward “Neutral” at 1.03. Weekly MAAD was negative with 9 issues positive and 11 negative. Weekly MAAD Ratio was toward “oversold” at .76. Readings in “Overbought/Oversold” spectrum can persist for extended periods of time although shorter-term statistics tend to be somewhat more sensitive.
  • Daily CPFL was negative Friday by 1.31 to 1.
  • Cumulative Volume (CV) in S&P 500 and S&P 500 Emini futures contract have moved in step with index pricing, but remains weaker than S&P 500 on relative basis.

So what does this short-term information suggest? It could be an indication the rally over the past month will prove to be merely a reflex bounce in the face of a lingering and still negative Intermediate Cycle.

Page 1 of 5 >>
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome