Bulls have thin upside edge in stock market

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

1430.15

+16.57

+1.17%

Dow Jones Industrials

13190.84

+55.83

+.42%

NASDAQ Composite

3021.01

+49.68

+1.67%

Value Line Arithmetic Index

3163.21

+70.71

+2.28%

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

Intermediate Cycle (Medium trend lasting weeks to several months) Neutral / Positive

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

The balancing act in the stock market continues. A few more buyers than sellers and the market goes up. It’s just like politics where a candidate only needs a little more than 50% of the electorate and he wins. From our point of view, we must attempt to gauge the quality of the “votes” coming into the market.

On the plus side of the ledger last week, the Value Line index rallied to a new all-time closing high of 3163.21 to better its previous closing high of 3138.44 made in the spring of 2011 when all of our key indicators peaked out. That’s a gain of 24.77 points. In other words it took the Value Line nearly two years to gain .78%. Is that bullish? And is the VAY representative of the market, considering the fact the S&P 500 remains 4.3% below its 2011 highs, the Dow 4.4%, and the NASDAQ Composite 6.8%. In addition, despite that new high in the VAY, the S&P is still 9.3% below its October 2007 high and the Dow 7.1%.

But bulls will point out that despite last Thursday’s sharp evening selling in futures when the S&P lost nearly 50 points before recovering about one half of the loss, weakness did not turn the Minor Cycle in the cash S&P negative when regular trading began Friday morning. They will say, “That over night recovery is buying demand just below the market.” Yes, there’s no denying the fact the short-term trend begun back on November 16 (1343.35 S&P 500) remains intact.

Market Overview – What We Know:

  • Major indexes posted marginal gains last week and Value Line Index rallied to new all-time high.
  • Market volume rose 24%.
  • Minor Cycle remains positive and S&P 500 must sell below lower edge of 10-Day Price Channel (1414.70 through Monday) to suggest reversal of short-term trend to negative. Intermediate Cycle remains negative until S&P 500 rallies above upper edge of 10-Week Price Channel (1430.56 through December 28).
  • Strength above September 14 S&P 500 intraday high at 1474.51 would be required to re-assert Major Cycle uptrend.
  • Daily MAAD bettered its September 14 intraday resistance high last Thursday, but remains well below major resistance peak reached back on March 20. Daily MAAD Ratio remains moderately “Overbought” (1.39) while Weekly MAAD Ratio remains “Neutral” at 1.06.
  • CPFL was positive by 1.71 to 1 last week with Weekly CPFL Ratio “Oversold” at .64.
  • 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 short-term low.

There is also the fact that our Daily Most Actives Advance/Decline Line (MAAD) broke upward and above first resistance on December 11 even though pricing in the S&P 500 has yet to follow suit by rallying above resistance at the September 14 intraday high (1474.51). But there’s a problem. Daily MAAD peaked on the Intermediate Cycle back on March 20, and despite strength since the indicator made a low on November 14, Daily MAAD has only recovered a little more than 50% of that decline. Is the advance in Daily MAAD since November 14 bullish? Yes. Is looming major resistance at the March 20 bearish? Yes.

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