S&P 500 erodes, but Value Line at all-time high

Market Overview – What We Know:

• New short-term highs were reached by all of major indexes Thursday, but only Value Line index finished in plus column and at new all-time high. S&P 500, Dow 30, and NASDAQ suffered small losses.
• An increase of just over 17% was registered by market volume compared to Wednesday’s levels.
• Minor Cycle remains positive in S&P 500 with bellwether needing to sell below lower edge of 10-Day Price Channel (1419.99 through Friday) to suggest short-term negative. Intermediate Cycle remains positive in S&P.
• Daily MAAD was negative Thursday with 8 issues up and 12 down. Daily MAAD Ratio remains near “Neutral” at .92. Daily MAAD also continues to hold below December 20 short-term high, despite S&P bids above equivalent level.
• Daily CPFL hit another short-term high Thursday with Calls on a Dollar Value basis exceeding Puts by 2.1 to 1. Daily CPFL Ratio remains “Overbought” at 2.69.

Market Overview – What We Think:

• Wednesday’s powerful rally in major indexes with new all-time high in Value Line index leaves question hanging in air – was rally a short-term flourish with no staying power, or was it beginning of something larger? Thursday’s mixed market did not answer question.
• While Value Line strength remains impressive, S&P 500, Dow 30, and NASDAQ Composite must follow suit with strength above September/October highs (1474.51—S&P 500) to foster broad confirmation.
• So far, it looks as if VAY move has been prescient relative to resumption of bull trend begun in March 2009, but in addition to other index strength we must also see MAAD and CPFL overcome key resistance made in September and in case of MAAD, the peak back in March.
• But even if S&P betters September high, index would be nowhere near overcoming October 2007 peak at 1576.09.

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.