Clearly, the burden of proof continues to rest squarely on the shoulders of the bulls. And in the wake of last week’s price action it seems obvious that it would be so easy to knock the bloom of the bullish rose, because once a short-term trend takes hold on the downside, the “Overbought” Intermediate Cycle could quickly be put in serious jeopardy. The S&P currently has a trailing stop at the lower edge of its 10-Week Price Channel through next Friday, March 1, at 1433.37. That’s a little over 80 points from Friday’s S&P close. Last Wednesday and Thursday nearly one half that amount was erased in just two sessions.
McCurtain Most Actives Advance/Decline Line (MAAD)
Longer-term MAAD characteristics aside, last week’s downside break in Daily MAAD last Wednesday put indicator below a defined uptrend line stretching back to the late December low in the S&P 500 (1398.11). And while Friday’s index price rebound caused MAAD to erase some of its losses from Wednesday and follow on selling on Thursday, Daily MAAD continues to look weak and vulnerable. Not only has the indicator tagged along reluctantly as index prices rallied to new short to intermediate-term highs over the past several weeks, but Daily MAAD has not even been able to better intermediate-term resistance made last March 20.
Then there’s Weekly MAAD and the long-term trend. Last week that indicator tapped a major downtrend line stretching back nearly 13 years to the 1999 highs that preceded the early 2000 bull market highs. There was an intervening plot high in July 2007 and the most recent high. Granted that the recent contact with and downward reversal from that trend line is minimal, the fact that Weekly MAAD would turn lower in that face of that line in a market environment that has left index prices struggling with little indicator confirmation since May 2011, is significant.
Smart Money has not been enamored of the stock market for some time, and especially not since the March 2009 price lows. While the indicator has moved upward with pricing, it is the downdrafts that have been the most telling. In that latter vein we continue to suspect those variances will continue to be the true measurement of this market’s health.
McCurtain Call/Put Dollar Value Flow Line (CPFL)
Daily CPFL rallied to a new short to intermediate-term high last Tuesday, but was unable to better that level in trading over the remainder of last week. And while the indicator remains in an intermediate uptrend begun in synch with the November lows and in a longer-term uptrend begun in December 2011, the indicator is nowhere near overcoming major resistance put in place two years ago in February 2011.
While options players have certainly not completely avoided this market, the overall drift of CPFL on the longer term continues to suggest that whereas there was eagerness to buy Call options on a Dollar Value basis after the March 2009 lows, that enthusiasm virtually disappeared after the May 2011 index price highs and has not returned. That lack of bullishness as reflected in CPFL on the Major Cycle is yet another indication that this stock market does not have the statistical underpinnings it ought to have.