Stock market volatility fades, cumulative volume lags price

Weekly Review: MAAD & CPFL Analysis

Stock market chart, technical analysis Stock market chart, technical analysis


Market Snapshot:


Week Chg

Week %Chg

S&P 500 Index




Dow Jones Industrials




NASDAQ Composite




Value Line Arithmetic Index




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

The headline we savored the most last week referred to the “unloved Dow rally.” As if hearts and flowers had anything to do with the stock market. But while headline writers were able to coin a phrase, it appears the public wasn’t paying much attention since mutual fund inflows are back toward record levels. The last time such extremes occurred was in 2007 and before that in 2000 – both coincident with bull market highs. But hey, misery ultimately loves company and since little changes with the psychology of the stock market, many investors, like groupies chasing Lady Gaga, will be lured by higher prices at a point when they “just can’t wait any longer.” Then the hammer will drop. Remember several years ago when some folks believed you “couldn’t lose money buying real estate” with OPM (Other People’s Money)? You betcha.

So here we are again. Almost…. There’s a bull trend that has been underway for just over four years even though most market statistics peaked two years ago in the spring of 2011. Mama Dow and the transports have climbed to new all-time closing levels. The S&P is within reach of its October 9, 2007 all-time high (1565.15). The Value Line index traded to a new high. The NASDSAQ Composite was last at its best levels since March 2009, but remains nearly 37% below an all-time high (5132.52) made in March 2000.

Index pricing has had one thing in common over the past four years – movement in the same upward direction. That is usually the case and when the time comes for the flip side of the formula, all will be moving downward in the same direction. And once again mutual fund investors will get hammered because fund managers must be fully invested, cannot go short the market or even be in cash, and must attempt to pick those stocks to include in their portfolios that are somehow “outperforming” the S&P. Good luck. That’s why John Q gets eviscerated in bear markets and that’s why we prefer a fast, maneuverable motor boat to a blind whale.

When the most recent upsurge began in March 2009 on the heels of a devastating and the second worst decline in stock market history, many believed the aftermath would result in a “normal” recovery that would ultimately erase all of the previous losses while setting the stage for a resumption super cycle bull trend that has been in effect since the July 1932 low (40.46—Dow Jones Industrial Average). We, however, suspect the March 2000 highs were the end of a 68 year rally and that the highs in October 2007 and the slightly higher highs of early 2013 could prove to be a massive consolidation that could be preliminary to a significant retracement of the gains since 1932.

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