Equity index price levels depend on cycle

Weekly Review: Are equities art?

Which brings us back to the stock market, that unemotional and rational venue where justifications never surface. We draw your attention, once again, to the long-term (Weekly) chart of our Most Actives/Advance Decline Line (MAAD). Notice how the indicator peaked the week ending April 29, 2011 and has yet to seriously challenge that high over the past 16 months even though most of the major indexes, as measured by the S&P 500, made a higher high in April 2012 and then a slightly higher high the week ending August 24, 2012.

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

cumulative, volume, emini

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

cumulative, volume, emini

What we are suggesting is that EVEN THOUGH prices have gained over the past 16 months, the stock market has very likely entered the justification phase when many investors will slip into denial while believing any number of bromides and rationalizations that will underscore their belief that holding equities on the long-term will “work out.” In other words, if they are ignorant of such indicators as MAAD with negative divergences that have also been replicated in our Call/Put Dollar Value Flow Line (CPFL), and Cumulative Volume (CV), they will look to the upcoming national election to clarify their market stance – “Well, once that’s over….” Or, “the economy has been underperforming, but its momentum will kick in on the upside after the first of the year.” And so on.

Index Daily / Weekly / Monthly Stops Weekly Monthly








S&P 500 Index

BUY 1416.49

BUY 1416.10

BUY 1415.70

BUY 1414.48

BUY 1413.94

SELL 1331.11

SELL 1256.02

Dow Jones Industrials

BUY 13219.18

BUY 13204.12

BUY 13189.98

BUY 13168.81

BUY 13159.88

SELL 12566.91

SELL 12029.08

NASDAQ Composite

BUY 3078.14

BUY 3080.45

BUY 3082.61

BUY 3082.67

BUY 3081.99

SELL 2853.56

SELL 2685.41

Value Line Index

BUY 2994.24

BUY 2992.89

BUY 2992.64

BUY 2990.88

BUY 2988.60

SELL 2799.47

SELL 2702.37

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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