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

Weekly Review: Price channels point direction for future price

The intermediate negative is also important to the short-term trend from a price perspective since it is at the upper edge of the 10-Week Price Channels in all of the major indexes at which resistance developed last week. Subsequent selling resulted in last Friday’s sell off. In other words, while an upside target to 1405 in the S&P 500 was visible via a measured move, it could be that larger Intermediate Cycle selling and resistance will bring that smaller cycle advance to an abrupt end.

Market Overview – What We Think:

  • With prices, as measured by S&P 500, continuing to hover within range of upper edge of 10-Week Price Channel and first decision point for positive reversal of Intermediate Cycle, status of intermediate trend remains in doubt. 
  • Selling last Friday may have tipped balance in favor of negative resolution of not only Minor Cycle, but also of larger and still negative intermediate trend.
  • With upside confirmation from intermediate Momentum, our Trading Oscillators, and Weekly MAAD Ratio needed for intermediate reversal to positive, we cannot preclude possibility short-term gains since June 4 low could prove to be no more than reflex rally within context still negative Intermediate Cycle.
  • Last Friday’s downside break below rising trend line in MAAD could be further evidence strength since June 4 lows will prove to be nothing but failed reflex rally in Intermediate Cycle negative.
  • While MAAD Daily Ratio continues to hover near “Neutral,” short-term “Overbought” conditions continue to persist in our short-term Trading Oscillators. Variance between MAAD and oscillators will soon be resolved.
  • Status of Intermediate Cycle will ultimately determine outcome of larger and more important Major Cycle trend that has been underway since March 2009, but which has had weaker statistical underpinnings than long-term rallies over the past decade and since March 2000 price highs.

But there are other issues…

First, the failure of Weekly MAAD to better its 2011 plot highs into the intermediate-term rally that peaked in late March/early April (see Weekly MAAD chart) is a bigger failure than the negative divergence that developed into the 2007 market highs. Currently, while S&P pricing has retained just over 90% of its gain since March 2009, Weekly MAAD was last sitting at the 55% recovery point. That disparity means that while Smart Money bought off of the March 2009 lows, their enthusiasm has been tempered on the upside while accelerating on the downside.

Daily S & P 500 with Cumulative Volume (CV)

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Weekly S & P 500 with Cumulative Volume (CV)

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