So it is with all market trends including the stock market. While equities had a healthy bounce in the wake of the March 2009 lows, the bulk of the 3 ½ year bull market (106%) developed between March 2009 and May 2011. Since then, gains have been labored and the S&P 500 has only rallied 6.5% in 18 months. In addition, volume since 2011 is not now what it was off of the bottom in March 2009. While the S&P 500 has recovered nearly 87% of the decline sustained in the 2007/2008 bear market, Cumulative Volume has only come back about 50%. That tone is reflected in our Most Actives Advance/Decline Line (MAAD) that peaked at the end of April 2011 and has been in a modest downtrend ever since with a series of lower highs (see Weekly MAAD chart). While the Weekly MAAD series was last not far from its last resistance peak made mid-September, it still remains well below a long-term down trendline stretching back to 2000. Put another way, over the past 12 years and since the 2000 highs, MAAD has continued to suggest that Smart Money has not been participating in this market to the same extent it participated prior to that major high, a bullish MAAD tendency evident in the great bull market that began in 1974.
Daily S & P 500 Emini Futures contract with Cumulative Volume (CV)
Weekly S & P 500 Emini Futures contract with Cumulative Volume (CV)
On the smaller cycle, Daily MAAD has been mirroring Weekly MAAD. Daily MAAD rallied nicely with the S&P 500 off of the October 4 lows and through late March 2012. But then the indicator deteriorated dramatically into early June 2012 when the market made yet another intermediate-term low. Since then, and despite the fact the S&P rallied to a new intermediate high in early September, Daily MAAD, while participating on the upside in rallies, has steadfastly refused to confirm S&P 500 strength. In fact, it had last recovered only 33% of its decline since the March 20 high. Once again, Smart Money has been signaling it has not liked the second rally on the short-term following that late March/early April 2012 high, just as it has not liked the second rally following the spring 2011 highs on the Intermediate Cycle.