Most stock market internals still positive, but overbought

MAAD & CPFL Review

 

Market Snapshot for session ending 5-13-13
 

Last

Day Change

%Change

S&P 500 Index

1633.77

+.07

00

Dow Jones Industrials

15091.68

-26.81

-.18%

NASDAQ Composite

3438.79

+2.20

+.06%

Value Line Arithmetic Index

3683.94

-7.82

-.21%

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

* Cycle status is based on S&P 500.

Market Overview – What We Know:

  • S&P 500 and NASDAQ Composite index eked out new highs Monday while the Dow Jones 30 and Value Line index registered small losses.
  • Market volume declined by 6.1%.
  • All Cycles (Minor, Intermediate, and Major) remain positive, but historically “Overbought.”.
  • Short-term volatility continues to suggest price vulnerability.
  • Selling below lower edge of 10-Day Price Channel (1595.82 through Tuesday) in S&P 500 would suggest reversal of Minor Cycle to negative. Intermediate Cycle in S&P 500 remains positive until 1532.39 through May 17.
  • Daily MAAD rallied to another short to intermediate-term high Monday and highest level since March 2009. Fourteen issues were positive and 6 were negative. Daily MAAD Ratio was “Overbought” at 2.18.
  • Call/Put Dollar Value Flow Line (CPFL) hit another short to intermediate high Monday and CPFL Ratio was “Overbought” at 1.88.
  • Cumulative Volume (CV) in S&P 500 and S&P Emini has moved higher with S&P since April 18 low, but not to same extent as has pricing. As a consequence, on relative basis both remain weaker than S&P pricing.

Market Overview – What We Think:

  • While market internals continue to exhibit somewhat positive flavor with positive readings in Daily MAAD and CPFL Monday, fact that short-term trend is also “Overbought” in all categories is a worry.
  • Also, given fact that market has demonstrated little weakness since April 18 while short-term volatility continues to work lower into zone of vulnerability, odds do not favor an indefinite continuance of near-term rally.
  • At same time, VIX-derived volatility data relative to volume has NOT reached new lows as index prices have rallied to new highs to suggest move to news highs is suspicious.
  • While Cumulative Volume has kept in step with cash indexes to extent CV has moved in same direction as pricing, power of CV movement has lagged pricing to suggest weaker buying during most recent short-term rally.
  • How Minor Cycle plays out will determine staying power of larger Intermediate Cycle that has been underway since November 16, but so long as that Intermediate Cycle positive remains intact, all near-term pullbacks must be regarded as merely corrective.

 

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

5/13

5/14

5/15

5/16

5/17

5/17

5/31

S&P 500 Index

SELL 1589.88

SELL 1595.82

SELL 1601.89

SELL 1607.17

SELL 1611.75

SELL 1532.39

SELL 1360.47

Dow Jones Industrials

SELL 14761.90

SELL 14807.54

SELL 14855.27

SELL 14901.09

SELL 14938.39

SELL 14280.35

SELL 12701.94

NASDAQ Composite

SELL 3319.46

SELL 3334.44

SELL 3348.48

SELL 3362.55

SELL 3375.85

SELL 3183.98

SELL 2896.99

Value Line Index

SELL 3555.02

SELL 3571.40

SELL 3588.37

SELL 3604.54

SELL 3619.32

SELL 3442.43

SELL 2895.29

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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