Market locked between near-term highs, downside sell levels

Weekly Review: MAAD, CPFL indicator analysis

Market Overview – What We Think:

  • With Minor Cycle stats now ranging from “Neutral” to “Oversold,” it remains to be seen whether or not market action over past two weeks will prove to be yet another corrective phase in Intermediate Cycle advance initiated after June lows, or something more negative on larger Intermediate Cycle.
  • To resolve issue, S&P 500 must sell below rising uptrend line (last near 1410) with follow through weakness below lower edge of 10-Week Price Channel (1374.62). Weakness below latter point would almost certainly terminate four-month-old rally.
  • In meantime, nothing but strength back above September 14 intraday high (1474.51) would re-assert Intermediate Cycle advance. Between here and there (uptrend/Price Channel and resistance) coin will continue to flip.
  • Indicators such as Daily Most Actives Advance/Decline Line (MAAD) still suggest market has gotten way ahead of itself. Daily MAAD has come nowhere near overcoming March 20 resistance high even though indicator participated, albeit feebly, on upside after June lows.
  • MAAD failure hints Smart Money has only been buying a bit more than it has been selling over past few months, even though index pricing has made new highs for move initiated in March 2009.
  • Fact none of our key indicators is anywhere near making new cumulative highs is evidence character of market has changed since May 2011.
  • In background it’s important to keep in mind fact market is entering time of year that has proven to be historically vulnerable -- think 1929, 1987, and 2007.

There is another larger question than can crop up? What is the market? Some believe that the large cap S&P 500 is the “real” market. Others contend that the Value Line index better represents the “true” stock market. We suspect they’re both right to the extent ALL indexes tend to rally in the same direction at the same time, whatever the cycle. It’s merely a matter of degree. The S&P 500, Dow Jones Industrial Average, and the NASDAQ Composite made Major Cycle lows the week ending March 6, 2009. The following week the Value Line index made its low. Ironically, of the four, it was the Value Line that rallied to a new all-time high (3171.84) on September 14.

Daily S & P 500 with Cumulative Volume (CV)

cumulative, volume, s&p

Weekly S & P 500 with Cumulative Volume (CV)

weekly, cumulative, volume

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