Equity index price levels depend on cycle

Weekly Review: Are equities art?

From our point of view, nothing but new highs in MAAD, CPFL, and CV would cause us to suggest our bearish grumblings have been in error. There’s also Momentum on all cycles that has failed to confirm any of the upside movement in the market since last October. That failure has been amplified by a distinct lack of market volume that has been uncharacteristically low for months to suggest higher prices have been spurred by weaker and weaker hands.

Or we could simply capitulate and say, “What the heck, so long as the market remains as a vehicle for buying and selling, it doesn’t matter where we buy Amazon, or anything else for that matter. Because in the long term it’s all ART.” Even if you have $100 million to buy a super high end cookie cutter apartment with mauve-colored drapes in Manhattan, or Miami. You betcha.

McCurtain Most Actives Advance/Decline Line (MAAD)

Daily MAAD continued to flutter within relatively narrow range last week while holding below July 3 high when S&P 500 hit an intraday high at 1374.81. MAAD has confirmed none of strength in S&P since then and into August 21 high at 1426.68. Mirroring short-term MAAD weakness, the larger Weekly MAAD Cycle has remained in a tentative mode since peaking back in April 2011. That series failed on two occasions to make new highs with the broad market in April 2012 and recently in August 2012.

The failure of MAAD in the historical context is an ongoing suggestion Smart Money has been using market strength to sell, on balance. The fact the broad market made slightly higher highs while MAAD did not on two cycles is, in our opinion, evidence that the underpinnings of this market are weak as compared to other periods when MAAD dramatically led on the upside (See MAAD articles in August and September issues of Futures Magazine).

maad, daily

weekly, maad

McCurtain Call/Put Dollar Value Flow Line (CPFL)

After peaking back on August 17 on the daily cycle, CPFL has been drifting lower. While it’s true the indicator via the Daily CPFL Ratio has moved back into “Oversold” territory (last at .64), the larger Weekly CPFL Ratio remains toward “Overbought” territory (last at 2.13).

In addition, the failure of CPFL to better its April 2011 resistance highs, let alone the most recent levels, is another sign the internal mechanics of the stock market leave a lot to be desired, at least as measured by options activity. With options players continuing to show a lack of commitment on the upside and even though index prices have continued to work marginally higher, CPFL movement is an indication they could become more enthusiastic if equity prices begin to move lower.

cpfl, daily

weekly, cpfl

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