Stock market losses leave long-term uptrend in doubt

Weekly Review: MAAD, CPFL indicator analysis

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

 

Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1379.85

-34.35

-2.42%

Dow Jones Industrials

12815.39

-277.77

-2.12%

NASDAQ Composite

2904.87

-77.26

-2.59%

Value Line Arithmetic Index

2972.01

-66.15

-2.17%

Minor Cycle (Short-term trend lasting days to a few weeks) Negative

Intermediate Cycle (Medium trend lasting weeks to several months) Negative

Major Cycle (Long-term trend lasting several months to years) Positive / Neutral

Every Intermediate Cycle decline that develops within the context of the extant Major Cycle advance brings with it a lingering question – Is this pullback the beginning of the end for the major trend. The current situation is no different. Since March 2009 there have been three measureable intermediate term declines that resulted in lows in July 2010, October 2011, and June 2012. To a somewhat lesser extent, there were four downside feints that turned out to have minimal staying power. Those included selling into July 2009, February 2010, March 2011, and November 2011.

Any of those periods of price weakness could have been followed by a reversal of the longer-term uptrend that began in March 2009, but only if certain internal market criteria were also met. In fact, disparate internal conditions have only been met since the broad market peaked in May 2011 and then sold lower into the October 2011 lows. Thereafter, while price action in the major indexes resulted in a series of higher highs until the most recent price peak on September 14, 2012 (1474.51—S&P 500) none of our key indicators has confirmed price strength.

Market Overview – What We Know:

  • Major indexes suffered sharp losses last week. Biggest loser was NASDAQ Composite index that was down 2.59%.
  • Of the S&P 500, Dow Joes Industrial Average, NASDAQ Composite, and Value Line index, all except Value Line index, were trading below uptrend line stretching back to October 2011. But all were last below lower edge of 10-Week Price Channels to suggest Intermediate Cycle negativity.
  • Trading Volume on NYSE rose 49% last week compared to previous week, but earlier period only consisted of three trading days due to closure of market for Hurricane Sandy.
  • To suggest more positive flavor on Intermediate Cycle, S&P 500 would need to rally above upper edge of 10-Week Price Channel (1455.44).
  • To re-assert Major Cycle uptrend, S&P must rally above September 14 intraday high at 1474.51.
  • MAAD on both Daily and Weekly cycles continues to underscore negative divergences. After peaking on March 20, Daily MAAD was not only unable to keep in step with broad market, but net deterioration since September 14 has moved short-term indicator within range of June 4 support lows. Weekly MAAD has consistently failed on upside since April 29, 2011.
  • Daily MAAD Ratio was last “Oversold” while Weekly MAAD Ratio was near “Neutral.”
  • CPFL lost ground on both Daily and Weekly cycles last week with Daily CPFL Ratio “Oversold” and Weekly CPFL Ratio near “Neutral.”
  • Daily Cumulative Volume in S&P 500 has kept in synch with index, but Daily CV in S&P 500 Emini was noticeably negative while exhibiting plot at S&P price equivalent of 1325, nearly 50 points below current levels.

Our Weekly Most Actives Advance/Decline Line made a long-term high the week ending April 29, 2011 and has yet to surpass that level, despite the fact the S&P 500 rallied above its May 2011 highs the week ending March 2, 2012. Intermediate Cycle “Oversold” conditions into the October 2011 index prices lows were followed by more S&P buying that carried the index upward to a new high for the move on September 14, 2012 (1474.51). But the highs in April and September 2012 were not confirmed by MAAD. Put another way, all strength in the S&P 500 since the October 2011 Intermediate Cycle rally began, is suspect compared to the long-term uptrend begun in March 2009. The failure of MAAD on the upside relative to price action underscores an increasing lack of faith in the market by Smart Money following the spring highs of 2011.

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