Indicators suggest short-term overbought condition in stocks

MAAD, CPFL indicator review

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

 

Market Snapshot for session ending 11-29-12
 

Last

Day Change

%Change

S&P 500 Index

1415.95

+6.01

+.43%

Dow Jones Industrials

13021.82

+36.70

+.28%

NASDAQ Composite

3012.02

+20.24

+.68%

Value Line Arithmetic Index

3073.00

+25.98

+.85%

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

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

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

Market Overview – What We Know:

  • Additional buying extended gains on Minor Cycle in all of major indexes Thursday.
  • Market volume relative to Wednesday’s levels was higher by about 1% and remains well below normal levels.
  • S&P 500 would need to sell below lower edge of 10-Day Price Channel (1370.46) to suggest reversal of near-term trend to negative.
  • Intermediate cycle remains positive until S&P 500 rallies above upper edge of 10-Week Price Channel (1456.37 through November 30).
  • Daily MAAD was positive Thursday by 18 to 2 and Daily MAAD Ratio was last extremely “Overbought” at 2.70, the most extreme short-term reading in months.
  • Daily CPFL was positive Thursday by 3.53 to 1. Daily CPFL Ratio was moderately “Overbought” at 1.14.
  • Cumulative Volume in both S&P 500 and S&P Emini continue to under perform S&P pricing to suggest weak market underpinnings.

Market Overview – What We Think:

  • While short-term trend has reversed to positive, continuing low volume as reflected in Cumulative Volume numbers and elimination of recently “Oversold” short-term stats could soon lead to near-term top.
  • We suspect short-term strength will not cause larger Intermediate Cycle to reverse to positive with gains above upper edge of 10-Week Price Channel (1456.37—S&P 500).
  • “Neutral” to “Overbought” conditions within context of Intermediate Cycle negative would be suggestive of Minor Cycle high.
  • Ultimately, extent to which September/October highs (1474.51—S&P 500) might be seriously challenged could determine whether or not current strength is merely brief upside feint in Intermediate Cycle negative, or something more positive.
  • How current price action plays out relative to September highs will determine status of Major Cycle uptrend in effect since March 2009.


Index Daily / Weekly / Monthly Stops Weekly Monthly
 

11/26

11/27

11/28

11/29

11/30

11/30

11/30

S&P 500 Index

SELL 1364.20

SELL 1361.33

SELL 1362.46

SELL 1366.02

SELL 1370.46

BUY 1456.37

SELL 1277.32

Dow Jones Industrials

SELL 12660.35

SELL 12629.03

SELL 12626.01

SELL 12645.95

SELL 12676.05

BUY 13540.25

SELL 12198.68

NASDAQ Composite

SELL 2865.38

SELL 2863.38

SELL 2865.20

SELL 2872.11

SELL 2884.42

BUY 3126.60

SELL 2738.24

Value Line Index

SELL 2929.34

SELL 2920.87

SELL 2922.64

SELL 2929.26

SELL 2939.54

BUY 3101.06

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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