Stock market drifts as near-term trend stuck in limbo

Weekly Review: MAAD & CPFL Analysis

 

Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1556.89

-3.81

-.24%

Dow Jones Industrials

14512.03

-2.08

-.01%

NASDAQ Composite

3245.00

-4.07

-.12%

Value Line Arithmetic Index

3524.46

-15.31

-.43%

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

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

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

If, on a whim, you had decided on the eve of March 15 to throw caution to the winds, pack a suitcase, and head off to your favorite island to munch on coconuts and ogle nubile wahines, because you had a hunch the market would be doing nothing for the next week, you were right. Not only was the market supremely dull last week while you were sunning yourself, but it gave new meaning to the old idiom it was so boring it was “like watching paint dry.” Even then paint had the edge. Highlighting the relative inactivity on a week to week basis, overall market volume declined by about 10%.

Market Overview – What We Know:

  • Major indexes changed little last week. Value Line index rallied to new all-time high Wednesday, but then faded for the largest weekly loss (-.43%) of four indexes.
  • Overall trading volume declined 10%.
  • All Cycle remains positive, but “Overbought.”
  • S&P 500 weakness below lower edge of 10-Day Price Channel (1548.19 through Monday) would negate short-term advance in effect since February 26 low. Intermediate trend remains positive until lower edge of 10-Week Price Channel (1480.97 through March 29).
  • Daily MAAD remained below its March 11 short to intermediate-term high for all of week. Weekly MAAD pulled back to long-term trend line stretching back to 1999 at point prior to March 2000 market highs. Weekly MAAD has yet to overcome resistance made in spring of 2011.
  • Daily CPFL was unable to better March 15 short to intermediate-term high last week. Indicator remains in gradually up sloping longer-term advance begun in December 2011, but is nowhere near major resistance plot high made week of February 25, 2011.

What is most frustrating in the wake of another five days of trading with only one flirtation with a new all-time high by the Value Line index is that market tone is still a question mark. All cycles including the Minor, Intermediate, and Major remain positive, but also “Overbought.” On the near-term trend, it wouldn’t take much to flip the short cycle into negative territory, given the fact short-term Momentum is only a nudge from negative territory. But while pricing in the S&P 500 threatened the lower edge of its 10-Day price Channel last Tuesday through Friday, there was no decisive downward break to suggest a reversal to negative of the near-term uptrend that began back on February 26 (1485.01—S&P 500). And without a reversal of the short-term trend to negative, there is no chance the larger Intermediate Cycle that has been positive since the November 16 lows (1343.35—S&P 500) will turn negative.

Market Overview – What We Think:

  • Lateral action of major indexes last week did little to resolve short-term trend except insofar as that trend remains positive, “Overbought,” and vulnerable.
  • New short-term negative could have developing implications for larger Intermediate Cycle if there is serious selling to extent lower edges of 10-Week Price Channels (1480.97—S&P 500 through March 29) are threatened.
  • Considering fact market Momentum on short-term cycle could flip negative easily in low volatility environment on both Minor Cycle and longer-term, it could be this market is much closer to short-term selling zone than point of buying. Proof of that assertion, however, will be determined by staying power of Minor Cycle.
  • In meantime, by default, we must regard all short-term pullbacks as merely hesitations in larger cycle advance, including major trend that has been favorable since March 2009 lows.
  • Conversely, so long as pricing and indicators are not in synch on upside, as they were from March 2009 until May 2011, lingering doubts will persist about long-term viability of Major Cycle and we will continue to wonder how much longer this market will be able to shake off unfavorable indicator divergences.

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