Market up, but volume down and momentum still negative

MAAD & CPFL Report

 

Market Snapshot for session ending 2-27-13
 

Last

Day Change

%Change

S&P 500 Index

1515.99

+19.05

+1.27%

Dow Jones Industrials

14075.37

+175.24

+1.26%

NASDAQ Composite

3162.25

+32.61

+1.04%

Value Line Arithmetic Index

3403.53

+40.80

+1.21%

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

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:

  • Market rebound continued Wednesday with all of major indexes posting strong gains.
  • Trading volume decreased by another 9% Wednesday on heels of 5% shrinkage Tuesday.
  • Short-term trend remains negative. S&P 500 must rally above upper edge of 10-Day Price Channel (1523.11 through Thursday) to reverse new Minor Cycle negative to positive. Intermediate trend turns negative below lower edge of 10-Week Price Channel (1433.37 through Friday).
  • Daily MAAD was positive by 17 to 3 Wednesday, but remains in short-term downtrend following Minor Cycle high on February 19. Daily MAAD Ratio remains in negative territory (.89) and toward “Oversold.” Defined short-term uptrend in Daily MAAD in effect since late December low (1398.11—S&P 500) has been terminated, however.
  • Daily CPFL was positive Wednesday by 1.77 to 1 and moved slightly higher, but remains below short-term high created February 19. Daily CPFL Ratio was marginally “Overbought” at 1.32.

Market Overview – What We Think:

  • Market strength over the past two sessions notwithstanding, until there is price movement in S&P 500 back above upper edge of 10-Day Price Channel, all strength must be regarded as nothing but short-covering/bargain-hunting rally. But then, even if S&P rallies above 10-Day Price Channel, nothing but buying back above February 19 intraday high (1530.94) would signal resumption of intermediate uptrend begun after November lows.
  • Given strength over past couple of days, is it possible short-term correction is over? It’s possible, but not likely. While there were obviously buyers just below market into Monday and Tuesday lows, do they have power to get intermediate rally going again?
  • Interestingly, despite gains over past two days, short-term Momentum, our proprietary Trading Oscillators, and Daily MAAD Ratio have all remained negative to suggest short-term downtrend may not yet be over.
  • But until larger cycles reverse to negative, all Minor Cycle pullbacks must be regarded as just that – short-term pullbacks within context of larger cycle positives even though longer-term negative indicator divergences, most of which were created in early 2011, remain in effect.

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.

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 daily data for past 30 days*

CPFL daily data for past 30 days

Date

NYSE Adv

NYSE Dec

Date

OEX Call $Volume

OEX Put $Volume

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

1-21-13

Holiday

 

1-21-13

Holiday

 

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

1-25-13

15

5

1-25-13

45897

12776

1-28-13

10

9

1-28-13

9419

33969

1-29-13

12

8

1-29-13

12384

7416

1-30-13

10

10

1-30-13

13203

10238

1-31-13

6

14

1-31-13

4509

11894

2-1-13

17

3

2-1-13

17057

14662

2-4-13

4

16

2-4-13

18445

18181

2-5-13

17

3

2-5-13

25202

18738

2-6-13

11

9

2-6-13

22708

6372

2-7-13

6

14

2-7-13

10706

8964

2-8-13

12

8

2-8-13

11757

10102

2-11-13

15

5

2-11-13

7341

9714

2-12-13

14

6

2-12-13

14035

10674

2-13-13

9

11

2-13-13

22996

19130

2-14-13

10

9

2-14-13

22966

6378

2-15-13

6

13

2-15-13

39599

8680

2-18-13

Holiday

 

2-18-13

Holiday

 

2-19-13

15

5

2-19-13

59240

9448

2-20-13

1

19

2-20-13

9641

28039

2-21-13

3

17

2-21-13

26937

21352

2-22-13

16

4

2-22-13

13544

8585

2-25-13

2

18

2-25-13

10545

52295

2-26-13

14

5

2-26-13

15739

18237

2-27-13

17

3

2-27-13

24868

14009

*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.