Stock market's rally since November not feeling any warmer

Weekly Review: MAAD, CPFL indicator analysis

McCurtain Most Actives Advance/Decline Line (MAAD)

Daily MAAD continued to pull back last week as Daily MAAD Ratio poked into “neutral” territory. From a bullish perspective, it could be argued that the elimination of short-term “Overbought” conditions have reset the near-term cycle for another rally. On the flip side, while Daily MAAD did rally strongly after the November 16 market lows, the indicator has only retraced about 50% of its losses since the indicator peaked on the longer-term back on March 20. That prescience prior to the April/May correction has left MAAD with a significant negative divergence that has yet to be erased.

In addition, there is the long-term negative divergence in Weekly MAAD that peaked in late April 2011 and then failed to confirm market strength into the highs of April 2012 and again in September 2012. It could be argued that with the Weekly MAAD Ratio back at “Neutral” there is upside opportunity. It could also be asserted that the ongoing upside failure of the indicator since the spring of 2011 with only coincident small gains in the major indexes should be a cause for investor concern, not optimism.

daily, maad

weekly, maad

McCurtain Call/Put Dollar Value Flow Line (CPFL)

CPFL remains in a shallow uptrend begun in December 2011. And while the indicator has been demonstrating some improvement since the November index price lows, it has only recovered about 50% of its decline since the September highs. At the same time, it has recovered little of the losses since peaking back on February 25, 2011.

Bottom line with CPFL is that options traders have been buying marginally more calls than puts on a Dollar Value basis over the past year, but on the long-term trend they remain unimpressed with the prospects for remarkably higher stock market prices.

cpfl, indicator

weekly, cpfl

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