Market rallies, but still oversold on near-term cycle

MAAD, CPFL indicator review

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

 

Market Snapshot for session ending 10-16-12
 

Last

Day Change

%Change

S&P 500 Index

1454.92

+14.79

+1.03%

Dow Jones Industrials

13551.78

+127.54

+.95%

NASDAQ Composite

3101.17

+36.99

+1.21%

Value Line Arithmetic Index

3080.55

+30.40

+1.00%

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

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

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

Market Overview – What We Know:

  • Follow through buying Tuesday propelled major indexes higher as market responded further to near-term “Oversold” conditions.
  • NYSE trading volume increased by 3% and Average Price per Share gained 86 cents to $62.39.
  • Pricing in S&P 500 is closing in on upper edge of 10-Day Price Channel (1456.09) to suggest possible reversal of Minor Cycle back to positive.
  • Intermediate Cycle remains positive and S&P 500 must sink below lower edge of 10-Week Price Channel (1392.40 through October 19) to indicate negative reversal.
  • Daily MAAD was positive Tuesday with 12 issues higher, 6 lower, and 2 unchanged. Indicator was last positioned slightly above rising uptrend line of shallow MAAD advance in effect since June low. Daily MAAD Ratio was last toward “Oversold” territory (.80).
  • Daily CPFL was positive Tuesday 2.08 to 1 with Daily CPFL Ratio toward “Oversold” (.64).

Market Overview – What We Think:

  • With S&P 500 last positioned to challenge upper edge of 10-Day Price Channel, so signaling possible reversal of Minor Cycle trend to positive after finding support at uptrend line stretching back to June low (1266.74), it remains to be seen if recent high at 1474.51will be overcome.
  • Failure in current environment would mean Intermediate Cycle rally underway since early June may have seen its best levels.
  • To prove bearish point on downside, however, S&P 500 must sell below rising uptrend line (last near 1425) with follow through weakness below lower edge of 10-Week Price Channel (1392.40 through 10-19). Selling below latter point would likely terminate four-month-old-plus rally while suggesting new Intermediate Cycle negative.
  • Indicators such as Daily Most Actives Advance/Decline Line (MAAD) continue to suggest market may have gotten ahead of itself even though Daily Ratios on both are reflecting near-term “Oversold” conditions.

cumulative, volume, s&p

cumulative, emini

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

10/15

10/16

10/17

10/18

10/19

10/19

10/31

S&P 500 Index

BUY 1458.43

BUY 1458.41

BUY 1456.09

BUY 1454.00

BUY 1451.03

SELL 1392.40

SELL 1269.05

Dow Jones Industrials

BUY 13582.96

BUY 13587.40

BUY 13571.71

BUY 13546.89

BUY 13518.85

SELL 12999.01

SELL 12141.09

NASDAQ Composite

BUY 3144.21

BUY 3137.59

BUY 3125.59

BUY 3115.61

BUY 3103.83

SELL 3009.09

SELL 2716.62

Value Line Index

BUY 3092.26

BUY 3091.36

BUY 3084.62

BUY 3081.00

BUY 3075.50

SELL 2935.99

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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