Stock market approaching critical point on intermediate cycle

Weekly Review: MAAD, CPFL indicator analysis

Underscoring all possibilities from here on is the unmistakable fact for the past 19 months the major indexes have been struggling to stay in positive territory since the highs they made in early May 2011 and the point at which ALL of our key indicators peaked out. Since May 2011 the S&P 500 is ahead 3.4%, the Dow 30 2.1%, the NASDAQ 3.1%, with the Value Line index down 2.1%. Those returns compare to the first 25 months of the bull trend from March 2009 through early May 2011 when the S&P gained 106%, the Dow 99%, the NASDAQ 128%, and the Value Line 217%. Clearly, in the face of indicator deterioration for the better part of the past two years, market risk and market potential have performed inversely. Unless there is remarkable improvement in our key indicators, we suspect the relationship between risk and performance will not favor bulls on the longer-term cycle.

Market Overview – What We Know:

  • Major indexes were mixed last week with “bluer” chips gaining marginally while lesser
  • quality issues faded. NASDAQ Composite index was big loser on week, down 1.06%.
  • Market volume declined 7%, despite usual five-day week.
  • Short-term trend remains positive and S&P 500 must sell below lower edge of 10-Day Price Channel (1399.52 through Monday) to indicate new short-term negative. To suggest reversal of Intermediate Cycle negative to positive, S&P 500 must rally above upper edge of 10-Week Price Channel (1449.74 through December 14).
  • Strength above September 14 S&P 500 intraday high at 1474.51 would re-assert Major Cycle uptrend.
  • Daily MAAD continues to outperform S&P 500 and had last recovered nearly 93% of its decline since September highs, but larger Weekly MAAD has demonstrated only marginal upside strength.
  • Daily MAAD Ratio remains “Overbought” (1.62) while Weekly MAAD Ratio was last just below “Neutral” (.96).
  • CPFL was positive by 1.08 to 1 last week with Weekly CPFL Ratio “Oversold” at .52.
  • On longer-term basis, Cumulative Volume (CV) in both S&P 500 and S&P Emini has continued to under perform relative to S&P 500 pricing since November 16 minor low.

Market Overview – What We Think:

  • Short-term rally in market indexes since November 16 S&P intraday low (1343.35) has eliminated near-term “Oversold” conditions with near-term “Overbought” levels now prevailing.
  • But market on Intermediate Cycle is quickly approaching point at which larger intermediate trend will be resolved positively or negatively. At this point we continue to suspect strength over past three weeks will prove to be countertrend rally in Intermediate Cycle negative so long as more concerted does not negate that outlook.
  • Ultimately, extent to which September/October highs (1474.51—S&P 500) are seriously challenged will determine whether or not recent strength proves to be brief upside bounce in Intermediate Cycle negative, or if it will develop into full-fledged reversal to positive that could influence staying power of Major Cycle uptrend underway since March 2009.
  • In face of indicator non-confirmations that have prevailed since mid-2011, we continue to wonder how much longer this market will be able to shake off internal, indicator negativity.

Daily S & P 500 with Cumulative Volume (CV)

cumulative, volume, sp, daily

Weekly S & P 500 with Cumulative Volume (CV)

weekly, cumulative volume, sp

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