Stock market near highs without key indicator confirmation

Weekly Review: Predominant risk may be on downside

Also, over the past 13 years there have been Intermediate Cycle price highs that were preceded by prescient indicator negativity in MAAD. The most notable was the peak that preceded the October 2007 high by nearly three months. MAAD again broke down prior to the May 2011 highs. But the status of the indicator in this current environment is significantly re-approaching the deterioration in 2007. After peaking back on July 3 about one-half way through the current rally begun on June 4, Daily MAAD has confirmed NONE of the strength in the broad market. That negative divergence suggests that Smart Money has been tending more toward selling on strength for the better part of the past two months than they have been inclined to buy on strength.

Daily S & P 500 Emini Futures contract with Cumulative Volume (CV)

Weekly S & P 500 Emini Futures contract with Cumulative Volume (CV)

While it could be asserted MAAD is simply early as it was in 2000 by several months, and that the market still has room on the upside before a final high is made, the point is that MAAD is demonstrating ongoing signs of deterioration not just on the very Major Cycle since 2000, but also on the Intermediate Cycle, and most recently on the Minor Cycle. All of that deterioration, regardless of cycle, indicates that the overall tone of the stock market switched in 2000 from a state of accumulation that had prevailed for the previous 25 years to one of net distribution. Some will disagree with that assessment, but that is our view as based on our interpretation of nearly 50 years of MAAD data.


Daily / Weekly / Monthly Stops                                      



                       8/27      8/28       8/29       8/30       8/31       8/31        8/31

S&P 500 Index

BUY 1412.55

BUY 1415.56

BUY 1416.30

BUY 1416.34

BUY 1416.24

SELL 1323.49

SELL 1229.29

Dow Jones Industrials

BUY 13240.29

BUY 13259.07

BUY 13252.91

BUY 13240.58

BUY 13229.52

SELL 12502.13

SELL 11829.11

NASDAQ Composite

SELL 3029.04

SELL 3036.25

SELL 3041.47

SELL 3044.31

SELL 3045.87

SELL 2840.56

SELL 2616.71

Value Line Index

SELL 2954.59

SELL 2963.05

SELL 2967.45

SELL 2967.73

SELL 2966.70

SELL 2973.41

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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