Short-term price break turns into stock market rout

MAAD & CPFL Report

Stock index chart, technical analysis Stock index chart, technical analysis

 

Market Snapshot for session ending 2-25-13
 

Last

Day Change

%Change

S&P 500 Index

1487.85

-27.75

-1.83%

Dow Jones Industrials

13784.17

-216.40

-1.55%

NASDAQ Composite

3116.25

-45.56

-1.44%

Value Line Arithmetic Index

3346.80

-69.19

-2.03%

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

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

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

Market Overview – What We Know:

  • Short-term trend took on more negativity Monday with sharp losses in all of major indexes. Value Line index was biggest loser, down 2.03%.
  • Market volume rose more than 22% compared to last Friday’s levels.
  • S&P 500 must rally above upper edge of trailing 10-Day Price Channel (1522.96 through Tuesday) to suggest reversal of new negative to positive. Intermediate trend turns negative below lower edge of 10-Week Price Channel (1433.37 through Friday).
  • Daily MAAD took another hit Monday and moved to lowest levels since late January. Indicator was negative by 18 to 2. Daily MAAD Ratio remains in negative territory (.85) and headed for “Oversold” territory. Defined short-term uptrend In Daily MAAD in effect since late December low (1398.11—S&P 500) has been terminated.
  • Daily CPFL was sharply negative by nearly 5 to 1 Monday and moved lower from new short-term high created February 19. Daily CPFL Ratio was marginally “Overbought” at 1.30.

Market Overview – What We Think:

  • Damage to short-term uptrend last Wednesday and Thursday with Monday’s sharp losses leaves little doubt that at least Minor Cycle uptrend in effect since late December (1398.11—S&P 500) is over.
  • Big question now is how will near term weakness affect larger Intermediate Cycle that has been underway since November lows (1343.35—S&P 500).
  • Short-term Momentum, our proprietary Trading Oscillators, and Daily MAAD Ratio are now all negative to suggest next issue on near term will be to establish short-term low. Where that bottom develops will be important relative to next larger Intermediate Cycle.
  • Until there is a negative reversal of larger cycles, however, it remains to be seen whether or not indexes will have the power to continue higher once short-term correction has ended. Negative indicator divergences, most of which were created in early 2011, remain in effect. Nothing but new highs in MAAD, CPFL, Cumulative Volume (CV), and Momentum, an unlikely event, would erase longer-term statistical skepticism.

Index Daily / Weekly / Monthly Stops Weekly Monthly
 

2/25

2/26

2/27

2/28

3/1

3/1

3/31

S&P 500 Index

BUY 1520.69

BUY 1522.96

BUY 1524.91

BUY 1523.11

BUY 1522.00

SELL 1433.37

SELL 1347.47

Dow Jones Industrials

BUY 14008.63

BUY 14015.34

BUY 14023.86

BUY 14007.79

BUY 14006.29

SELL 13205.69

SELL 12675.84

NASDAQ Composite

BUY 3196.13

BUY 3200.51

BUY 3204.02

BUY 3196.35

BUY 3190.23

SELL 3025.51

SELL 2890.17

Value Line Index

BUY 3438.54

BUY 3447.16

BUY 3454.54

BUY 3449.15

BUY 3444.22

SELL 3177.23

SELL 2852.92

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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