Stock market losses leave long-term uptrend in doubt

Weekly Review: MAAD, CPFL indicator analysis

Market Overview – What We Think:

  • While recent sharp losses have certainly exacerbated negativity on short to intermediate trends, it remains to be seen whether or not near-term “Oversold” conditions will begin to take hold in sessions just ahead and some rebounding will develop.
  • If near-term reversal does not occur soon, what is hanging in balance is not only Intermediate Cycle negativity, but status of Major Cycle uptrend in effect since March 2009.
  • Fact that broad-based Value Line index has declined less that S&P, Dow 30, and NASDAQ Composite could be sign selling will be limited at this time, but considering ongoing deterioration in all of our key indicators, especially MAAD, burden of proof remains on bullish camp.
  • It is also important to remember that “Oversold” in early stages of new decline may be merely reflection of net “negativity” and unfavorable market momentum and not of a new buying opportunity.
  • When short-term bounce does develop, what will likely be lacking, however, as has been case since spring 2011 highs, would be indicator confirmation on upside, lack of which we continue to suspect has been revealing a lot about internal tone of market since price highs made in spring of 2011.
  • Indicators continue to suggest quality of buying has been deteriorating for months.

Our Weekly Call/Put Dollar Value Flow Line has been in similar straits. The indicator made a long-term high the week ending February 25, 1011 and has not revisited that level since then. In fact, the indicator remains not far above plot lows made in October 2011. CPFL failures on the upside continue to suggest that options players have increasingly been buying nearly as many puts on a Dollar Value basis as calls. For the sustenance of a long-term uptrend, that ratio is unacceptable.

Daily S & P 500 with Cumulative Volume (CV)

cumulative, volume

Weekly S & P 500 with Cumulative Volume (CV)

weekly, data, cumulative

Our Weekly Call/Put Dollar Value Flow Line has been in similar straits. The indicator made a long-term high the week ending February 25, 1011 and has not revisited that level since then. In fact, the indicator remains not far above plot lows made in October 2011. CPFL failures on the upside continue to suggest that options players have increasingly been buying nearly as many puts on a Dollar Value basis as calls. For the sustenance of a long-term uptrend, that ratio is unacceptable.

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