Market hits highs on lower volume, bearish volatility

Weekly Review: MAAD & CPFL Analysis

There is also the fact that longer-term volatility readings are currently at their lowest levels since April 2010 and July 2011 at points which coincided with intermediate-term highs. And short-term volatility is at its lowest levels since just before the corrections that preceded the November, December, and February lows. While such low readings can linger, they are nevertheless a hint the market could be much closer to at least a short-term top than a short-term bottom. Renewed buying has caused the uptrend begun after the February 26 lows to resume. Question is, “is that resumption of buying merely a flurry into a Minor Cycle high, or …?”

If strength proves to be a little extra “fluff” after several weeks of net gains, then a reversal must come with confirmed short-term weakness below the lower edges of 10-Day Price Channels (1546.37—S&P 500 through Monday) relatively soon. Then we would look to see how such selling might affect the larger Intermediate Cycles that remain positive until the lower edges of 10-Week Price Channels (1485.30—S&P 500).

Daily S & P 500 Emini Futures contract with Cumulative Volume (CV)

Weekly S & P 500 Emini Futures contract with Cumulative Volume (CV)

Another scenario would call for a continuation of buying that could result in the S&P rallying to a “measured move” target (1616) as calculated from the February 26 low (1485.01). In other words, the S&P could tack on another 3% before weakening. The neighborhood of 1616 in the S&P is interesting for another reason. If a ruler is applied to the S&P bull high of March 2000 (1552.87) and the bull market peak in October 2007 (1576.09), a slightly upsloping trendline is visible. That line just happens to intersect at 1610 presuming a continuation of the rally since March 2009.

Index Price Channel Stops (10-Bar MAs of Highs/Lows ) Weekly Monthly
 

4/1

4/2

4/3

4/4

4/5

4/5

4/30

S&P 500 Index

SELL 1546.37

SELL 1547.14

SELL 1547.89

SELL 1550.24

SELL NA-

SELL 1485.30

SELL 1349.76

Dow Jones Industrials

SELL 14414.46

SELL 14419.66

SELL 14422.73

SELL 14440.07

SELL NA

SELL 13712.81

SELL 12653.67

NASDAQ Composite

SELL 3225.72

SELL 3227.89

SELL 3227.54

SELL 3232.01

SELL NA

SELL 3115.64

SELL 2882.50

Value Line Index

SELL 3507.31

SELL 3508.92

SELL 3507.87

SELL 3511.93

SELL NA

SELL 3335.08

SELL 2859.75

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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