Stock market beginning to look overdone on minor cycle

MAAD, CPFL indicator review

 

Market Snapshot for session ending 1-24-13
 

Last

Day Change

%Change

S&P 500 Index

1494.82

+.00

+.00

Dow Jones Industrials

13825.33

+45.99

+.33%

NASDAQ Composite

3130.38

-23.28

-.74%

Value Line Arithmetic Index

3367.48

+15.76

+.47%

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

Market Overview – What We Know:

  • Major indexes closed mixed Thursday after S&P 500, Dow 30, and Value Line index rallied to best levels since November lows. S&P pulled back to fractionally positive status at close. NASDAQ Composite continues to lag and has yet to better September resistance.
  • Trading volume rose 15% compared to Wednesday.
  • Minor, Intermediate, and Major remain positive. Minor Cycle is “Overbought” while intermediate trend is moderately “Overbought.”
  • A short-term negative would be suggested in S&P if index falls below lower edge of 10-Day Price Channel (1467.39 through Friday). Intermediate trend turns negative below (1391.74).
  • Daily MAAD was positive by 11 to 9 Thursday and continues to look lackluster compared to recent gains in S&P 500. Daily MAAD Ratio was unchanged and marginally “Overbought” at 1.21.
  • Daily CPFL was slightly negative Thursday at 1.07 to and remains below September intermediate resistance. Daily CPFL Ratio was moderately “Overbought” at 1.42.
  • Cumulative Volume (CV) eked out new short to intermediate high Thursday in S&P 500, but action was not confirmed by S&P Emini, Dow 30, and NASDAQ Composite.

Market Overview – What We Think:

  • Short-term trend in all of major indexes has begun to look a bit “toppy” and overdone on upside.
  • If move since November lows turns out to be A-B-C rally with “B” leg pullback from December 19 to January 2, “C” leg rally could carry S&P toward 1510.
  • 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.
  • Suggestion lingers that rally since November lows has been fueled by weaker hands 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 negative tone.

volume

volume

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

1/21

1/22

1/23

1/24

1/25

1/25

1/31

S&P 500 Index

SELL 1458.17

SELL 1460.70

SELL 1462.73

SELL 1464.93

SELL 1467.39

SELL 1391.74

SELL 1310.68

Dow Jones Industrials

SELL 13364.87

SELL 13391.91

SELL 13412.96

SELL 13434.88

SELL 13465.23

SELL 12899.21

SELL 12445.73

NASDAQ Composite

SELL 3093.99

SELL 3096.53

SELL 3098.97

SELL 3104.45

SELL 3108.12

SELL 2933.93

SELL 2809.46

Value Line Index

SELL 3255.40

SELL 3262.11

SELL 3268.80

SELL 3276.07

SELL 3284.42

SELL 3012.55

SELL 2779.90

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.

Next page: Indicator review

We are also updating the daily chart of both the Call/Put Dollar Value Flow Line (CPFL) and Most Actives Advance/Decline Line (MAAD) indicators every day and providing the most recent raw data so you can begin to plot the indicators on your own (see below). The weekly equity index indicator summary provides longer-term commentary based on these indicators.

The definitions of the indicators along with links to the original stories provide helpful background. Also, Robert describes these indicators in a recent I-Trade show presentation available online.

maad

cpfl

 

MAAD daily data for past 30 days*

CPFL data for past 30 days

Date

NYSE Adv

NYSE Dec

Date

OEX Call $Volume

OEX Put $Volume

12-11-12

16

4

12-11-12

58541

16935

12-12-12

14

6

12-12-12

14037

29016

12-13-12

5

15

12-13-12

16200

21122

12-14-12

11

8

12-14-12

755

2204

12-17-12

16

4

12-17-12

3965

2127

12-18-12

16

4

12-18-12

54268

15407

12-19-12

8

10

12-19-12

23234

17820

12-20-12

15

4

12-20-12

60116

9429

12-21-12

1

19

12-21-12

113448

24330

12-24-12

7

11

12-24-12

12273

4633

12-25-12

Holiday

 

12-25-12

Holiday

 

12-26-12

10

10

12-26-12

13183

9095

12-27-12

4

16

12-27-12

13740

15048

12-28-12

3

17

12-28-12

9876

20514

12-31-12

19

0

12-31-12

66137

7704

1-1-13

Holiday

 

1-1-13

Holiday

 

1-2-13

18

2

1-2-13

41038

18210

1-3-13

8

12

1-3-13

27988

14827

1-4-13

16

4

1-4-13

15918

9326

1-7-13

8

12

1-7-13

12111

9021

1-8-13

5

15

1-8-13

30884

8826

1-9-13

11

9

1-9-13

6980

9587

1-10-13

17

3

1-10-13

17253

12394

1-11-13

10

10

1-11-13

21372

8073

1-14-13

8

11

1-14-13

25044

8390

1-15-13

10

10

1-15-13

6735

7626

1-16-13

10

10

1-16-13

9145

14231

1-17-13

11

8

1-17-13

17630

15208

1-18-13

12

7

1-18-13

30618

15985

1-22-13

11

9

1-22-13

13881

14187

1-23-13

8

12

1-23-13

11642

7175

1-24-13

11

9

1-24-13

12868

13706

*Note: Unchanged issues are not counted.


 

About the Author

Robert McCurtain is a technical analyst/market timer, private investor and financial markets consultant based in New York City.