Value Line Index sets high bar for major indexes

Bear, bull, stock prices

Market Overview – What We Know:

• On Tuesday and for second session in row, strong gains were posted as all of the major indexes rallied to new short-term highs. The Value Line index rallied to new all-time high (3174.84).
• Market volume rose more than 10%.
• Short-term trend remains positive and S&P 500 would need to sink below lower edge of 10-Day Price Channel (1413.36 through Wednesday) to suggest reversal of trend to negative.
• Intermediate Cycle is trending toward positive in S&P 500, Dow Jones Industrial Average, and NASDAQ Composite after having turned positive in Value Line Index.
• Daily MAAD rallied to new short-term high Tuesday with 16 issues positive and 4 negative. Daily MAAD Ratio remains “Overbought” at 2.00. Indicator continues to hold below major resistance peak reached back on March 20.
• Daily CPFL was positive Tuesday by 3.52 to 1 while Daily CPFL Ratio was moving toward moderately “Overbought” levels (1.28).

Market Overview – What We Think:

• New short-term highs in major indexes Tuesday with new all-time high in Value Line index leaves market in dilemma in that S&P 500, Dow 30, and NASDAQ Composite must now confirm Value Line on upside to re-assert Major Cycle advance begun in March 2009. S&P must rally above 1474.51 to re-assert uptrend, but such move would still not create new all-time high in S&P above October 2007 high at 1576.09.
• And while Daily MAAD continues to power higher, indicator must continue upward and above March 20 resistance peak to get in synch with index pricing. Is that possible? Maybe. But considering fact Daily MAAD Ratio is already into “Overbought” territory and has already begun to demonstrate upside non-confirmations, short-term trend has become mature.
• There is no denying market strength of late, however, and given proximity of pricing in S&P, Dow, and NASDAQ to September highs as Value Line has made a new high, prematurely pulling sell trigger could be a bad idea.

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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