Is recent stock market strength a victory with costs too great?

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

1466.47

+64.04

+4.56%

Dow Jones Industrials

13435.21

+497.10

+3.84%

NASDAQ Composite

3101.66

+141.35

+4.77%

Value Line Arithmetic Index

3277.55

+171.14

+5.50%

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

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

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

Perched on their well-worn bar stools one Sunday afternoon, two none-too-swift sports promoters are engaged in a heated conversation about winners and losers. Getting nowhere, as they attempt to determine what constitutes a real winner, one finally says, “OK. I’ll bet you $1,000 that a stable of 20 lemmings can beat ANY 20 racehorses. And I’ll back the lemmings.” Delighted with the bet, the second promoter says, “You’re on.” A date and place for the race is set.

The race is held. In the uneven contest, initially the horses out run the lemmings by miles, but the horses get loose and are left running all over the countryside. Undeterred by the galloping chaos, the horse promoter confronts the lemming backer and says, “You lose. I win. Pay up.” Grinning, the fatuous lemming loser, confident in his apparent pyrrhic victory, says, “ You may have won on pure mileage, but at least all of my guys were running in the same direction.” 

Market Overview – What We Know:

  • All major indexes were on plus side last week with Value Line index rallying to new all-time high and S&P 500 finishing week at best closing level since December 2007.
  • Market volume increased by 63% as market activity returned toward normal.
  • Minor Cycle is positive and S&P 500 must sell below lower edge of 10-Day Price Channel (1416.53 through Monday) to suggest negative reversal of short-term trend. Intermediate Cycle remains positive until S&P 500 sinks below lower edge of 10-Week Price Channel (1385.21 through January 11).
  • Daily MAAD has yet to better December 20 short-term high even though S&P has exceeded coincident price level. Indicator also remains well below major resistance peak reached back on March 20. Daily MAAD Ratio is “Neutral” (1.06) while Weekly MAAD Ratio is moderately “Overbought” (1.25).
  • Daily CPFL rallied to another short-term high last Friday, remains “Overbought” (2.81), and is in an uptrend initiated in December 2011. CPFL was positive by 5.68 to 1 last week with Weekly CPFL Ratio toward “Oversold” at .89. But major and long-term resistance persist in indicator.
  • Cumulative Volume (CV) in both S&P 500 and S&P Emini, while moving upward with prices since November lows, has continued to under perform relative to S&P 500 pricing.

So it has been with the stock market for some time. While some equities have been running all around the countryside after an initial surge (imagine the initial rally off of the March 2009 lows through early May 2011), others have been plodding along in the same direction, but without much enthusiasm. Underscoring the entire scenario there have been obvious detractors and marked enthusiasts.

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