Market selloff reaffirms developing negative cycle

MAAD, CPFL indicator review

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

 

Market Snapshot for session ending 11-7-12
 

Last

Day Change

%Change

S&P 500 Index

1428.39

+11.13

+.79%

Dow Jones Industrials

13245.68

+133.23

+1.02%

NASDAQ Composite

3011.93

+12.27

+.41%

Value Line Arithmetic Index

3085.37

+31.41

+1.03%

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

Market Overview – What We Know:

  • Sharp losses in major indexes Wednesday underscored tentative “neutrality” of market prior to decline and developing negative tone on larger Intermediate Cycle.
  • Trading volume on NYSE relative to Tuesday’s activity rose 30%. Average Price per Share declined $4.62 to $59.79 (Tuesday’s AVP at $64.41 may have been a typo, but we have no way of corroborating that data).
  • Minor Cycle remains negative until S&P rises above upper edge of 10-Day Price Channel (1427.82 through Thursday).
  • S&P pricing has closed in on long-term uptrend line (last near 1380) stretching back to October 4, 2011 when S&P hit intraday low at 1074.77.
  • To reverse Intermediate Cycle to positive S&P 500 would need to rally above upper edge of 10-Week Price Channel (1451.21 through November 9).
  • Major resistance and point to overcome to re-assert long-term uptrend in S&P 500 remains at 1474.51 created on September 14.
  • Daily MAAD was net negative Wednesday with 20 issues lower and none positive. Daily MAAD Ratio slipped back into “Oversold” territory (.74).
  • Daily CPFL was negative Wednesday by 2.50 to 1 with Daily CPFL Ratio holding near “Neutral” (.93).

Market Overview – What We Think:

  • Wednesday’s sharp losses after several days of hesitation in face of apparently “Oversold” readings simply underscored historical evidence that “Oversold” early in larger cycle decline (intermediate in this case) may not be all it seems.
  • Weakness amplified developing influence of larger Intermediate Cycle that has turned negative, but that still remains moderately “Overbought.”
  • With S&P prices near an uptrend line stretching back to October 2011, we could see some rebounding in the sessions just ahead on the Minor Cycle, but given Tuesday’s losses and new intermediate negative, that is only a 50/50 bet.
  • We continue to believe Intermediate Cycle uptrend begun in early June is over and September 14 intraday highs (1454.71—S&P 500) will not be seriously challenged for foreseeable future.
  • How new intermediate-term negative plays out could determine staying power of Major Cycle trend which is challenged in terms of “Overbought” conditions and lack of solid indicator underpinnings.

cumulative, volume

cumulative, volume

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

11/5

11/6

11/7

11/8

11/9

11/9

11/30

S&P 500 Index

BUY 1438.37

BUY 1433.67

BUY 1429.67

BUY 1427.82

BUY 1427.54

BUY 1451.21

SELL 1277.32

Dow Jones Industrials

BUY 13359.82

BUY 13312.41

BUY 13276.34

BUY 13260.17

BUY 13252.01

BUY 13499.72

SELL 12198.68

NASDAQ Composite

BUY 3041.02

BUY 3030.67

BUY 3019.74

BUY 3016.08

BUY 3016.04

BUY 3149.46

SELL 2738.24

Value Line Index

BUY 3041.22

BUY 3032.20

BUY 3027.17

BUY 3033.01

BUY 3041.34

BUY 3093.61

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.

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