Stock market near highs without key indicator confirmation

Weekly Review: Predominant risk may be on downside

Bull shadow, stock market, chart Bull shadow, stock market, chart

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)  Positive

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

With last Friday’s close in the S&P 500, 12 weeks have elapsed since the major indexes put in place short to intermediate-term lows back on June 4. And while the S&P 500 and the S&P Emini futures contract rallied marginally above their late March and early April highs last week before fading, that action was a solo performance since none of the other major indexes with the exception of the tech-weighted S&P 100 confirmed S&P 500 strength by also reaching their best levels since March 2009.

More importantly, it could be important to put price action since June into perspective relative to movement over the past year, since March 2009, and since October 2007. If an investor had purchased the S&P at the June low he would now be up a little over 12%. If he bought in May 2011 and has been waiting for the past year to break even, he’d now be up about 4%. If he was super prescient and bought back in March 2009, he’d be ahead 113%. But alas, if that same investor bought in October 2007 he’d still be in the hole by more than 9%.

Our point?

Market Overview – What We Know:

  • Major indexes lost ground last week.
  • NYSE trading volume rose about 3% on week, but was still below normal. Average Price per Share declined 25 cents to $59.57. Highest recent AP/S was $61.48 on March 15.
  • Dow Jones Industrials price action last Tuesday suggested Key Reversal Day, but none of other indexes confirmed that action in Dow 30.
  • S&P 500 and Dow Jones Industrial Average slightly penetrated lower edges of 10-Day price Channels and now must move above upper edges (1412.55—S&P 500 and 13240.29—Dow 30 through Monday)  to suggest resumption of uptrend. NASDAQ Composite and Value Line index have yet to fracture lower edges of 10-Day Price Channels.
  • Intermediate Cycle would require weakness below lower edge of 10-Week Price Channel (1323.49 through August 31) to turn negative.
  • Short-term Momentum in S&P 500 was last near “Neutral” while our proprietary Trading Oscillators on Minor Cycle remain positive, but were last moving lower from “Overbought” levels. Intermediate Cycle remains toward “Overbought.”.
  • MAAD was negative last week by 5 to 14 (1 issue unchanged). Weekly MAAD Ratio was moderately “Overbought” at 1.29. Daily MAAD continues to hold below peak made July 3.
  • CPFL was negative last week by 1.48 to 1 and continues to hold below resistance put in place back on April 9. Daily and Weekly CPFL Ratios remain toward moderately “Overbought” levels.
  • Cumulative Volume (CV) failed to confirm strength in S&P 500 and S&P Emini to best levels since June 4 last week.

WHERE and WHEN purchases were made remains the issue as it always does. And for investors looking at the market now, the dilemma is are older longs going to warrant retention as time goes on and does the market’s current status justify the addition of new positions in expectation of more price appreciation? While the time horizon for holding a position is an issue, short-term trade vs. long-term, what the stock market is going to do even on the near term will affect both the short and long-term holder.

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