Stock market posts weekly loss; intermediate cycle at risk

Weekly Review: MAAD & CPFL Analysis

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

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

What we know is that the Minor Cycle was “Overbought” going into the recent highs (1573.66—S&P 500). The Intermediate and Major Cycles remain “Overbought.” Short-term Momentum and our Daily Most Actives Advance/Decline Line (MAAD) did not confirm the new price highs. Short-term volatility readings were, and are still, at their most bearish levels since an interim Minor Cycle high was reached mid-February. In other words, volatility is not back at a level that would suggest this market has seen at least a short-term low. On the longer-term, volatility is back at points equal to levels not seen since April 2010 and May 2011. In the first instance the market entered into a three-month correction with a 17% loss in the S&P. In the second, the S&P lost 22% over four months.

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

4/8

4/9

4/10

4/11

4/12

4/12

4/30

S&P 500 Index

SELL 1552.00

SELL 1554.37

SELL 1554.19

SELL 1554.31

SELL 1551.97

SELL 1493.28

SELL 1349.76

Dow Jones Industrials

SELL 14458.16

SELL 14482.65

SELL 14495.45

SELL 14508.06

SELL 14500.21

SELL 13801.77

SELL 12653.67

NASDAQ Composite

BUY 3259.49

BUY 3261.64

BUY 3262.05

BUY 3256.15

BUY 3247.18

SELL 3128.04

SELL 2882.50

Value Line Index

BUY 3542.79

BUY 3540.54

BUY 3534.99

BUY 3524.00

BUY 3512.66

SELL 3352.98

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.

There is another part of this market equation that is a bit more philosophical. We do not believe that the bull trend that began in March 2009 is of the same “quality” as the advance that accompanied the powerful upmove in the 1990s, or the rally that lasted from early 2003 until October 2007. This market has been suffering from systemic anemia for months. It is not healthy. The price gains have lulled many, like the family we mentioned earlier, into believing price gains will continue indefinitely. But given the fact this is not the first market cycle we have experienced, we find it hard to believe uneducated investors can enter a four-year-old bull market and still expect to come out whole so late in the game. But maybe we are totally in error. Maybe our indicators are completely out of synch. Maybe we are indeed at the cusp of a perpetual “New Paradigm.”

Or not….

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