Market off early Thursday, recovers; minor cycle in jeopardy

Market Overview – What We Know:

• Once intraday lows were reached near 12:30 pm Thursday, market recovered into close and left evidence of only small losses.
• Market volume rose 23% compared to Wednesday’s levels, but remained well below normal.
• While indexes recovered from early selling Thursday, Minor Cycle has nonetheless been jeopardized with S&P 500 close below lower edge of 10-Day Price Channel (1424.46).
• Intermediate Cycle remains negative with S&P continuing to hold below upper edge of 10-Week Price Channel (1430.56 through December 28).
• Daily MAAD was negative Thursday with 4 issues positive and 16 negative. Daily MAAD Ratio was last just below “Neutral” at .92.
• Daily CPFL was negative Thursday by 1.10 to 1. Options volume remains low on Dollar Value basis. Daily CPFL Ratio “Overbought” at 2.21.

Market Overview – What We Think:

• Despite market recovery from early session losses, odds of resumption of positive action on Minor Cycle were diminished Thursday.
• If it turns out December 18 S&P high (1448.00) was peak of rally, what is also important is that S&P, Dow 30, and NASDAQ Composite failed to recently better September highs (1474.51—S&P 500), despite new all-time high in Value Line index. History will tell whether or not VAY was prescient in terms of suggesting resumption of long-term bull that began in March 2009.
• Even if S&P had bettered September highs, index would be nowhere near overcoming October 2007 peak at 1576.09.
• And while Daily MAAD made new short-term high December 20, indicator must continue upward and must overcome March 20 resistance peak to suggest confirmation of long-term bull.

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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About the Author

Robert McCurtain is a technical analyst/market timer, private investor and financial markets consultant based in New York City. He can be reached at traderbob@nyc.rr.com.

If you would like to read more about how the CPFL is constructed, read a Futures article on the concept. This link will take you to the MAAD article. A two-part series about system development with the MAAD also is available.