Market locked between near-term highs, downside sell levels

Weekly Review: MAAD, CPFL indicator analysis

If the Value Line index represents the “real” market, does that new high tell us anything about the staying power of equities on the long term? Not really. In 2007 the S&P 500 and the Dow 30 peaked in October at new all-time highs. That was a few months after the Value Line made a high back in July 2007. The NASDAQ Composite peaked in October 2007 with the S&P and the Dow, but was nowhere near making a new all-time high, remained well below its peak in March 2000, and still remains well below that level.

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

Our point? Price levels, as such, bear little relationship to market “health” except insofar as those price points are reflected in coincident indicators and measurements such as “Relative Strength” that gauge how a particular issue or index has been performing relative to all other investments. Relative to the S&P, Dow, NASDAQ, and Value Line, the latter was the best performer, net, since the 2009 lows. But does that information necessarily tell us where the market will make a final long-term top? No. It does not. In fact, during the 2007/08 bar market the Value Line index lost more than 60% while the Dow Jones Industrial Average declined only 54%. In that context which was the worst investment? And which was the best investment subsequently?

What really counts is trend identification. Once that problem has been solved, then other methods such as Relative Strength, Cumulative Volume, Support and Resistance levels, and so on can be used to identify the strongest issues in a bull trend and the weakest (for short sales) in a bear market.

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

10/1

10/2

10/3

10/4

10/5

10/5

10/31

S&P 500 Index

BUY  1462.89

BUY  1463.55

BUY  1459.80

BUY  1457.58

BUY  1455.04

SELL  1374.62

SELL  1269.05

Dow Jones Industrials

BUY  13598.43

BUY  13609.23

BUY  13589.90

BUY  13576.29

BUY  13557.20

SELL  12887.24

SELL  12141.09

NASDAQ Composite

BUY  3181.78

BUY  3182.68

BUY  3171.87

BUY  3165.52

BUY  3157.91

SELL  2960.06

SELL  2716.62

Value Line Index

BUY  3133.68

BUY  3131.78

BUY  3118.39

BUY  3109.23

BUY  3099.22

SELL  2886.89

SELL  2723.41

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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