Stock market's intermediate cycle gains negative momentum

Stock index, chart, technical analysis

Market Overview – What We Know:

• Further selling on short-term trend Tuesday caused more red ink across board in major indexes.
• NYSE trading volume rose nearly 6% and Average Price per Share declined 67 cents to $60.51.
• Weakness in Dow Jones Industrials and NASDAQ Composite indexes suggests new Intermediate Cycle negative. While S&P 500 and Value Line index have yet to follow suit below similar levels, it won’t take much more selling to get two on board.
• Intermediate Cycle remains positive in S&P 500 until lower edge of 10-Week Price Channel (1405.79 through October 26).
• Daily MAAD was negative Tuesday with 4 issues higher and 16 lower. Indicator hit new short-term low Tuesday and was last at lowest level since August 3 when S&P was quoted near 1390. Daily MAAD Ratio remains “Oversold (.76).
• Daily CPFL was negative Tuesday by 2.09 to 1 with Daily CPFL Ratio still toward “Oversold” (.57).
• Cumulative Volume (CV) in S&P 500 and S&P Emini has declined below defined uptrend line in effect since June lows to suggest 4 ½-month-old rally is over.

Market Overview – What We Think:

• As we stated in “Conclusion” of our October 21 Weekly Market Summary, we believe Intermediate Cycle uptrend begun June 4 is over. September 14 intraday highs (1454.71—S&P 500) should remain intact for foreseeable future.
• Given fact pricing in all of major indexes has moved within range of lower edges of 10-Week Price Channels (105.79—S&P 500) and has even broken below those points in Dow 30 and NASDAQ Composite, as near-term “Oversold” conditions persist, we wouldn’t be surprised to see near-term bounce develop soon.
• We also suspect that if a near-term pop does occur, it will be short-lived and will produce no more than “Neutral” readings near-term. Such conditions could then precede setup for resumption of larger intermediate negative.
• How current short to intermediate-term drama plays out will determine staying power of Major Cycle trend which is challenged in terms of “Overbought” conditions and lack of indicator underpinnings.

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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