Stock market rallies, approaches near-term overbought condition

Weekly Review: MAAD, CPFL indicator analysis

So we’re back at another one of those points that have developed since index price highs made an Intermediate Cycle high back in the spring of 2011 – after defined Intermediate Cycle pullbacks into the lows of October 2011 and then again in June of 2012, prices rallied to new highs and their best levels since March 2009, but NONE of our key indicators confirmed pricing to those new highs.

Market Overview – What We Think:

  • Short-term upward pop in market indexes over past several sessions has eliminated much of near-term “Oversold” conditions while replacing them with “Neutral” to moderately “Overbought” readings. Updraft in Daily MAAD Ratio is yet another indication strength since November 16 could prove to be nothing but reflex rally.
  • Ultimately, extent to which September/October highs (1474.51—S&P 500) are seriously challenged will determine whether or not strength is merely a brief upside feint in Intermediate Cycle negative, or if it will turn into full-fledged intermediate reversal to positive.
  • How price movement plays out will determine status of Major Cycle uptrend in effect since March 2009.
  • In face of ongoing indicator deterioration, such as in our Daily MAAD series that has erased all of its gain since June lows, we can only wonder how this market can shake off so much internal negativity to make new highs for the move begun in March 2009. If it does, yet another negative divergence would likely develop.

Which brings us to this most recent pullback. After the September/October highs in the major indexes, short-term selling morphed into an Intermediate Cycle negative. Uptrend lines since the October 2011 lows were fractured marginally. Cumulative Volume trend line breaks confirmed that action. Daily MAAD that had underscored none of the market’s advance after it peaked back on March 20 began moving decidedly lower after the September highs and made a fractionally lower low on November 14 before recovering somewhat over the past several sessions. Weekly MAAD remains weak relative to the longer-term trends with two noticeable upside failures since May 2011. And CPFL has remained lackluster since peaking way back on February 25,2011.

Daily S & P 500 with Cumulative Volume (CV)

cumulative, volume, sp

Weekly S & P 500 with Cumulative Volume (CV)

weekly, cumulative, volume, sp

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