Stock market advances despite half-hearted indicator confirmation

Analyzing failure

Our Call/Put Dollar Value Flow Line (CPFL) has behaved similarly to MAAD even though CPFL uses an entirely different data set via options statistics. CPFL peaked on the long term the week ending February 25, 2011 and just before the May 2011 highs. It has yet to revisit that level, despite higher S&P prices. CPFL did break above near-term resistance at the April 2012 highs last week, but it is the major cycle peak made 18 months ago that remains a major obstacle. While CPFL has participated on the upside when there were rallies since the spring of 2011, it has done so with less enthusiasm than during declines.

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

daily, cumulative, volume, emini

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

cumulative, volume, emini, s&p

Cumulative Volume (CV) is another problem. Because CV reflects the bias of overall market activity, it is a good measure of the “quality” of rallies and declines. Following the 2009 lows, CV in both the S&P 500 and the S&P Emini kept in synch with the market until April 2010. Since then CV has confirmed NONE of the Intermediate Cycle highs in the S&P 500 even though it has participated in each rally. What has been happening, especially during the decline after the May 2011 highs, is that CV fell more than it gained. Some of that negative disparity has been erased recently with CV movement above the April 2012 resistance peak, but CV in neither the S&P nor the S&P Emini has broken above resistance made back in April 2010. A similar lack of upside confirmation has been evident in the Dow 30 and the NASDAQ Composite, even though the latter rallied to new all-time highs last week.

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

9/17

9/18

9/19

9/20

9/21

9/21

9/30

S&P 500 Index

SELL 1411.16

SELL 1415.01

SELL 1419.21

SELL 1423.33

SELL 1431.43

SELL 1356.50

SELL 1256.02

Dow Jones Industrials

SELL 13103.90

SELL 13135.07

SELL 13175.42

SELL 13212.86

SELL 13283.83

SELL 12779.71

SELL 12029.08

NASDAQ Composite

SELL 3076.35

SELL 3081.85

SELL 3086.73

SELL 3093.47

SELL 3107.26

SELL 2906.06

SELL 2685.41

Value Line Index

SELL 2996.29

SELL 3010.24

SELL 3024.89

SELL 3038.31

SELL 3060.10

SELL 2843.10

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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