Short-term stock market trend positive, but still precarious

Crosscurrents persist in markets

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

Market Snapshot:

 

Last

Week Chg

Week %Chg

S&P 500 Index

1362.66

+5.88

+.43%

Dow Jones Industrials

12822.57

+45.48

+.35%

NASDAQ Composite

2925.30

+16.83

+.57%

Value Line Arithmetic Index

2866.39

-15.38

-.53%

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

A veteran trader once told us, “When the market gets locked between a definable high and low, draw two horizontal lines – one across the top boundary and once across the bottom point. When the market breaks above one or the other boundary, take a position. In the meantime, go fishing.”

Welcome to market price action since late March. On April 2 the S&P 500 rallied to a new short to intermediate high at 1422.38. It then corrected Intermediate Cycle excesses by pulling back nearly 45% and 155.64 S&P points, or just a touch over what is considered a “normal” correction, 40% to 60% of the previous gain. That would be since last October’s lows (1074.77—S&P 500). Since June 4 (1266.74), however, the S&P has been locked in a staccato-like advance consisting of four small moves up with three countertrend corrections. That movement has taken up the better part of the past six weeks and has retraced just under 62% of the decline from April 2 through June 4, or what is also a “normal” corrective phase. In other words, after the normal pullback of the October/April advance the market may be completing a smaller, normal reflex bounce.

Market Overview – What We Know:

  • Major indexes with exception of Value Line index posted small gains last week.
  • Trading volume on NYSE rose about 5%, but Average Price per Share only advanced 3 cents to $58.64,
  • As measured by S&P 500, short-term trend is now positive, but “Overbought.” Next larger Intermediate trend is threatening on upside.
  • Contradicting movement by our short-term Trading Oscillators toward “Overbought,” Daily MAAD Ratio remains “Oversold” and was last plotted at .79. Weekly MAAD Ratio was near “Neutral” at .96. Both MAAD time series continue to substantially underperform broad market. Daily MAAD remains near S&P equivalent price of about 1310 while Weekly MAAD is near S&P price of about 1290.
  • Daily MAAD was negative Friday by 3 to 17 while weekly data was favorable by 11 to 9. Whichever cycle is used, Smart Money remains unenthused by recent rally.
  • Daily CPFL was negative Friday by 1.11 to 1 while Weekly CPFL was higher by 1.46 to 1. Also, CPFL on both cycles remains weaker than index pricing and continues to remain well below highs of May 2011.
  • CV in S&P 500 and S&P Emini have moved above July 3 resistance highs, but both remain well below late March/early April plot highs, let alone major resistance put in place May 2011..

Underscoring both actions is the fact that while the Minor Cycle has flipped back to positive, the larger Intermediate Cycle was last toying with the upper edges of 10-Week Price Channels in the S&P 500 and the Dow Jones Industrials. Pricing in the NASDAQ Composite and Value Line index remains weaker.

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