Stock market searches for near-term low

MAAD, CPFL indicator review

It was after the last two intermediate-term rallies that statistics on the indicator front became interesting. All of our key indicators confirmed market strength toward the market highs of May 2011 when the S&P 500 peaked at 1370.58. From March 2009 until that point the S&P gained just under 106%. Thereafter, however, NONE of our indicators including the Most Actives Advance/Decline Line (MAAD), the Call/Put Dollar Value Flow Line (CPFL), Cumulative Volume (CV), or Momentum on the long-term cycle confirmed strength in the S&P. While the S&P gained 37% from October 2011 through the September 14, 2012 high, it only gained 7.5% from that spring 2011 peak and the point at which the bull trend was re-affirmed on the upside, until September 2012.

Daily S & P 500 Emini Futures contract with Cumulative Volume (CV)

daily, emini, volume

Weekly S & P 500 Emini Futures contract with Cumulative Volume (CV)

weekly, emini, cumulative, volume

It is that lack of indicator confirmation over the past year and a half that continues to be the issue on the Major Cycle. While MAAD, our key measure of Smart Money, has participated in all of the rallies since March 2009, participation has been lackluster. In addition, since the September highs, Daily MAAD, after failing to better its March 20 peak, as the S&P rallied into mid-September, has moved sharply lower. In fact, Daily MAAD was last positioned to sink below its June support lows. While Weekly MAAD remains better positioned in that it hasn’t deteriorated as much as has the more sensitive near-term daily indicator, the fact that both have shown little enthusiasm on the upside is a cause for concern on the longer term cycle.

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

10/29

10/30

10/31

11/1

11/2

11/2

11/30

S&P 500 Index

BUY 1450.62

BUY 1447.73

BUY 1442.74

BUY 1438.37

BUY 1433.67

SELL 1413.38

SELL 1277.32

Dow Jones Industrials

BUY 13494.61

BUY 13467.15

BUY 13409.70

BUY 13359.82

BUY 13312.42

BUY 13442.94

SELL 12198.68

NASDAQ Composite

BUY 3074.45

BUY 3061.27

BUY 3051.08

BUY 3041.02

BUY 3030.67

BUY 3135.46

SELL 2738.24

Value Line Index

BUY 3078.75

BUY 3072.76

BUY 3065.64

BUY 3058.32

BUY 3051.06

SELL 2991.26

SELL 2734.45

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.

In sum, while the market is reflecting short-term “Oversold” conditions in virtually all of our key indicators, in the face of a band of support in the S&P 500 formed last July and trailing 200-Day Moving Averages, we could see some short-term rebounding just ahead. But at best, we suspect such strength should prove to be short-lived and unsustainable because the bias of the larger and more important Intermediate Cycle has very likely changed from net positive to net negative. In addition, how that intermediate trend plays out in the weeks ahead under the onus of a series of negative indicators will determine the staying power of the long-term trend in effect since March 2009.

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