Stock market volume lags trend strength in key indexes

Stock index, chart, technical analysis

Market Overview – What We Know:

• S&P 500, Dow 30, and Value Line index rallied to new short to intermediate-term highs Wednesday. VAY hit new all-time high via intraday move, but backed off from Tuesday’s new closing high. NASDAQ Composite hit new short-term high, but has yet to better September resistance.
• Trading volume declined just under 6% compared to Tuesday’s levels.
• All cycles including Minor, Intermediate, and Major remain positive, but all are “Overbought” on Minor Cycle and moderately “Overbought” to “Overbought” on intermediate trend.
• To suggest short-term negative, S&P must sink below lower edge of 10-Day Price Channel (1464.93 through Thursday). Intermediate trend turns negative below (1388.08). And long-term trend below (1391.74).
• Daily MAAD was negative by 8 to 12, despite net market gains Wednesday. Eight issues here positive and 12 were negative. Daily MAAD continues to under perform S&P and was last back at level equal to December 20 resistance high. Daily MAAD Ratio was marginally “Overbought” at 1.21.
• Daily CPFL was positive Wednesday by 1.62 to 1 and remains below September intermediate resistance. Daily CPFL Ratio was moderately “Overbought” at 1.42.
• Cumulative Volume (CV) rallied to new short to intermediate high Wednesday in S&P 500, but action was not confirmed by S&P Emini, Dow 30, and NASDAQ Composite.

Market Overview – What We Think:

• S&P’s move to best levels since November 16 short-term low (1343.35) and highest closing level since December 2007 gives market more favorable tone along with strength to new all-time highs in Value Line index.
• Confirming movement in cash S&P CV to new short-term high is positive, but failure of CV In S&P Emini, Dow 30, and NASDAQ Composite on same cycle, means strength has been selective and spotty.
• Suggestion lingers that rally since November lows has been fueled by weaker hands than during previous rallies and continues to lack statistical underpinnings. Larger cycles have also lacked indicator confirmation since early 2011.
• Lingering weakness in MAAD, CPFL, Cumulative Volume, and Momentum, are an indication market could be on borrowed time. Nothing but new highs by all our key indicators, an unlikely event, would erase that negative tone.

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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