Market continues higher with persistent indicator divergences

MAAD still needs to confirm rally

Stock index, chart, analysis, bull shadow Stock index, chart, analysis, bull shadow

Market Snapshot for session ending 08-02-12

 

Last

Day Change

%Change

S&P 500 Index

1401.35

+7.12

+.51%

Dow Jones Industrials

13168.60

+51.09

+.39%

NASDAQ Composite

3015.86

+25.95

+.87%

Value Line Arithmetic Index

2938.92

+29.04

+1.00%

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

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

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

Market Overview – What We Know:

  • Follow-on gains Tuesday propelled indexes toward major resistance (1422.38—S&P 500) put in place in Late March/early April.
  • Short-term trend remains positive and would need to sink below lower edge of 10-Day Price Channel (1360.53 through Wednesday) to suggest reversal of Minor Cycle to negative.
  • Intermediate Cycle was last positive and would need to sink below lower edge of 10-Week Price Channel (1311.00--S&P 500 through August 10) to create Intermediate Cycle negative.
  • Momentum on both Minor and Intermediate Cycles was last toward “Neutral.” Major Cycle Momentum after months of hovering near “Neutral” was last back into moderately “Overbought” territory. Our Minor and Intermediate-term Trading Oscillators remain “Overbought.”
  • Daily MAAD has refused to confirm any of rally in market since peaking back on July 3. Indicator was nonetheless positive by 16 to 4 Tuesday with MAAD Daily Ratio moderately “Overbought” at 1.37.
  • Daily CPFL was positive by 2.08 to 1 Tuesday with Daily CPFL Ratio moving toward “Overbought” territory at 1.87.

Market Overview – What We Think:

  • More strength in major indexes Tuesday and movement by “bluer” chips toward major resistance may be setting market up for serious test of long-term uptrend initiated after March 2009 lows. Strength above 1422.28 in S&P 500 could re-assert that uptrend even though NASDAQ and Value Line indexes continue to lag.
  • Price strength in face of indicators that have continued to lag price action only underscores potential negative setup on longer term.
  • But higher prices do not a decline make. If rally is legitimate, however, and if the market rally is for real, then where’s indicator corroboration? We simply cannot remember an instance where market powered higher indefinitely without confirmation from key indicators
  • Lingering negative divergence of Daily MAAD, that has verified none of market strength since peaking July 3, is ongoing suggestion Smart Money has been doing more selling into strength over past several weeks than buying.

technical, analysis, stock, index

stock, index, technical, analysis, cumulative, volume

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

8/6

8/7

8/8

8/9

8/10

8/10

8/31

S&P 500 Index

SELL
1352.16

SELL
1358.18

SELL
1360.53

SELL
1360.21

SELL
1362.16

SELL
1311.00

SELL
1229.29

Dow Jones Industrials

SELL
12769.22

SELL
12817.03

SELL
12848.22

SELL
12844.52

SELL
12862.09

SELL
12434.30

SELL
11829.11

NASDAQ Composite

SELL
2890.35

SELL
2899.00

SELL
2902.69

SELL
2901.21

SELL
2910.85

SELL
2823.64

SELL
2616.71

Value Line Index

SELL
2826.91

SELL
2833.92

SELL
2834.52

SELL
2829.53

SELL
2828.84

SELL
2776.03

SELL
2649.82

Note: Stop levels, a function of the extant trend, are based on the trailing moving average price channels for the Highs or the Lows of an index. Whether or not a specific index is suggesting a “Buy” or Sell” is determined by whether or not index prices are above or below the current channel Stop levels. Stop levels should only be used as an entry or exit guide and in conjunction with other market entry and exit strategies.

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