Market selling Tuesday hints at new minor cycle negative

MAAD, CPFL indicator review

Stock index, chart, technical analysis Stock index, chart, technical analysis


Market Snapshot for session ending 09-25-12


Day Change


S&P 500 Index




Dow Jones Industrials




NASDAQ Composite




Value Line Arithmetic Index




Minor Cycle (Short-term trend lasting days to a few weeks) Neutral / Negative

Intermediate Cycle (Medium trend lasting weeks to several months) Positive

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

Market Overview – What We Know:

  • Sharp selling Tuesday caused S&P 500, NASDAQ Composite, and Value Line indexes to drop below defined 10-Day Price Channels to suggest reversal of Minor Cycle to negative. Only Dow Jones Industrials have yet to similarly decline below 10-Day Price Channel.
  • Intermediate and Major cycles remain positive, but “Overbought.”
  • NYSE trading volume rose 21% Tuesday and Average Price per Share declined 31 cents to $61.19.
  • To suggest Minor Cycle positive, S&P 500 would need to rally first above upper edge of 10-Day Price Channel (1458.27 through Wednesday) with follow-through above September 14 intraday high (1474.51). Strength above latter level would re-assert Intermediate Cycle uptrend that currently remains positive until lower edge of 10-Week Price Channel (1366.48 through September 28).
  • Daily MAAD was negative Tuesday with 3 issues higher and 17 lower. Daily MAAD was last back below July 3 resistance high.
  • Daily CPFL was negative by 3.74 to 1 and first time in nine sessions Tuesday. Daily CPFL Ratio remains “Overbought” at 2.52.

Market Overview – What We Think:

  • If Tuesday confirmed end of short-term positive, issue could then become staying power of larger Intermediate Cycle begun after June 4 lows (1266.74—S&P 500), a trend that has increasingly lacked indicator confirmation on upside.
  • In face of “Overbought” Intermediate Cycle with likely new short-term negative, burden of proof now rests with bulls. Given fact that intermediate trend remains positive, extent to which short-term trend weakens will determine whether or not Intermediate Cycle will remain viable.
  • Fact none of our key indicators is anywhere near making new cumulative highs, even though CPFL has demonstrated some renewed life over the past few weeks, is additional evidence of change in character of this market over past few months and on longer term since spring of 2011.
  • In background it’s important to keep in mind fact market is entering time of year that has proven to be historically vulnerable on occasion -- think 1929, 1987, and 2007.

 cumulative, volume, s&p

cumulative, volume, emini

Index Daily / Weekly / Monthly Stops Weekly Monthly








S&P 500 Index

SELL 1437.92

SELL 1443.09

SELL 1447.49

SELL 1449.43

SELL 1452.26

SELL 1366.48

SELL 1256.02

Dow Jones Industrials

SELL 13343.39

SELL 13391.81

SELL 13437.48

SELL 13463.60

SELL 13493.84

SELL 12843.58

SELL 12029.08

NASDAQ Composite

SELL 3121.38

SELL 3133.31

SELL 3143.05

SELL 3148.31

SELL 3155.54

SELL 2935.38

SELL 2685.41

Value Line Index

SELL 3077.56

SELL 3089.79

SELL 3100.02

SELL 3103.02

SELL 3107.07

SELL 2866.89

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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