Market Overview – What We Think:
- Ongoing failure of Cumulative Volume is an issue. While CV made slightly higher high in S&P 500 last Friday, ongoing upside failure in S&P 500 Emini and Dow 30 is suggestion rally since April 18 has been fueled by weaker hands.
- CV failure is first such negative divergence with prices since intermediate-term lows reached last November 16.
- There is also fact that Intermediate Cycle uptrend like its Major Cycle counterpart is “Overbought” and mature by any historical standard.
- Nonetheless, staying power of short-term trend will determine longevity of larger intermediate trend and possibly Major Cycle underway since March 2009.
- Until short-term decisively reverses larger Intermediate Cycle positive, we must regard all near-term negativity as just another pullback in larger cycles.
- But in background, so long as pricing and indicators are not in synch on upside, as they were from March 2009 until May 2011, doubts will persist as to long-term viability of Major Cycle and we will continue to wonder how much longer market will be able to shake off unfavorable indicator divergences.
Is it possible these indicators are no longer working? That despite higher prices and even new all-time highs in most of the major indexes, the failure of these indicators is a massive failure and may have nothing to do with an eventual downside reversal of the market. Especially if the market has entered into “new paradigm” territory, a new secular bull market. In that instance those indicators would have proven to be nearly useless.
But consider this. If MAAD is wrong about this market and more new highs and an indeterminate period of rising prices will follow, that action will occur for the first time since 1961, the point at which MAAD data became available. Is it possible MAAD could be that wrong? Sure, considering the whims of the stock market, anything is possible. But is it likely? No.
Daily S & P 500 with Cumulative Volume (CV)
Weekly S & P 500 with Cumulative Volume (CV)