Stock market drama may be close to resolution point

Weekly Review: MAAD, CPFL indicator analysis

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


Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1428.59

-32.34

-2.21%

Dow Jones Industrials

13328.85

-281.30

-2.06%

NASDAQ Composite

3044.11

-92.08

-2.93%

Value Line Arithmetic Index

3028.24

-66.70

-2.15%

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

Intermediate Cycle (Medium trend lasting weeks to several months) Neutral / Negative

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

Greek tragedy, according to Wikipedia, is “a form of drama based on human suffering that invokes in its audience an accompanying catharsis or pleasure in the viewing.” Via further nuances in “tragedy,” we are led to dramatic structure and Gustav Freytag’s “Freytag’s Pyramid” in which a five act play includes exposition, rising action, climax, falling action, and denouement, the point at which all becomes clear.

Some of these terms can be applied to the stock market.

Back at the June 4 index lows (1266.74—S&P 500), a reversal to positive on both the Minor and Intermediate Cycles looked probable and was soon evident, the “exposition.” “Rising action” in index pricing developed and the S&P 500 rallied to a new intermediate-term high on August 21 (1426.68) while bettering its previous high (1422.38) made back on April 2. But one of our key indicators, the Most Actives Advance/Decline Line (MAAD) peaked on March 20, failed to confirm S&P 500 strength on April 2 and then any of the S&P 500 gains to new highs for the move since then. In fact, although MAAD rallied upward with index pricing off of the June lows, its performance has been lackluster since then and last week slightly fractured on the downside an uptrend line in effect since June.

Market Overview – What We Know:

  • Major indexes were losers again last week when selling created some near-term “Oversold” conditions.
  • For third week in row, NYSE trading volume declined with loss of 8.4%. Average Price per Share was down $1.02 cents to $61.09.
  • Intermediate Cycle remains positive in all cycles and S&P 500 would have to sink below lower edge of 10-Week Price Channel (1392.40) to suggest negative reversal.
  • To indicate Minor Cycle positive, S&P 500 must rally above upper edge of 10-Day Price Channel (1458.43 through Monday).
  • Daily MAAD declined fractionally below rising uptrend line stretching back to June 4 low last Friday to hint four-month-old advance could be over. Daily MAAD Ratio was last toward “Oversold” at 81.
  • Weekly MAAD was negative with 4 issues higher and 16 lower. Weekly MAAD Ratio was toward “Neutral” at 1.04.
  • Weekly CPFL was sharply negative last week by 8.8 to 1 while Weekly CPFL Ratio remained moderately “Overbought” at 1.64. Indicator is nowhere near major resistance made week of February 25, 2011.
  • Cumulative Volume (CV) in both S&P 500 and S&P Emini remains weaker than index pricing on both short and long-term trends.

There are those other divergences of which we have spoken. CPFL did somewhat better recently, but is nowhere near major resistance highs made back in late February 2011. Cumulative Volume (CV) remains weak in the S&P 500, S&P Emini, and in the NASDAQ Composite and Dow Jones Industrial Average. Momentum on all cycles continues to underperform price action to suggest that the upward impetus of this market has become more labored.

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