It’s true the Intermediate Cycle in all of the major indexes remains positive. Intermediate Cycle Momentum has yet to turn negative just as intermediate-term uptrend lines remain intact. As a consequence, two possible conclusions about price action over the past month could be reached. First, the major indexes could be correcting near-term excesses developed into the mid-September highs and current “Oversold” to “Neutral” conditions are preliminary to another move to the upside. Ensuing strength could conceivably overcome those September resistance points.
Daily S & P 500 with Cumulative Volume (CV)
Weekly S & P 500 with Cumulative Volume (CV)
There is another possibility. Price action over the past month with two upside failures following the September highs is an indication of deteriorating buyer enthusiasm. Failure of Daily MAAD to better its March 20 highs is another indication of the unwillingness of Smart Money to get “on board.” In addition, last week’s deterioration in Daily MAAD back to a level equivalent to an S&P 500 price of 1390, while the S&P remains 40 points higher, is a sign of internal market deterioration. There is the added fact Daily MAAD has broken below its uptrend line stretching back to its June low and could make a new low below the June bottom without a great deal more net market weakness. That potential weakness does not leave us with a particularly sanguine feeling about this market. There is also the marked deterioration in the NASDAQ Composite index that has lost 6.1% since mid-September compared to an S&P loss of 3.3%.