Short-term stock market volatility indicator goes bearish

MAAD & CPFL Review

 

Market Snapshot for session ending 5-16-13
 

Last

Day Change

%Change

S&P 500 Index

1650.47

-8.31

-.50%

Dow Jones Industrials

15233.22

-42.47

-.28%

NASDAQ Composite

3465.24

-6.37

-.18%

Value Line Arithmetic Index

3724.33

-18.80

-.50%

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:

  • Following a slightly higher new high in NASDAQ Composite that was not confirmed by other major indexes, pricing headed south Thursday
  • Market volume rose a little over 3%.
  • Minor, Intermediate, and Major Cycles remain positive and “Overbought.”.
  • Short-term volatility based on VIX data continues to suggest Minor Cycle has entered zone of vulnerability, strength over past several days notwithstanding.
  • Selling in S&P 500 below lower edge of 10-Day Price Channel (1611.75 through Friday) would suggest reversal of short-term trend to negative. Intermediate Cycle in S&P 500 remains positive until 1532.39 through May 17.
  • Daily MAAD pulled back from new short to intermediate-term high made Wednesday at its best level since March 2009 with 7 issues positive and 13 negative. Daily MAAD Ratio, still “Overbought,” fell to 2.21.
  • Call/Put Dollar Value Flow Line (CPFL) rallied to new short to intermediate high Thursday as CPFL Ratio got a bit more “Overbought” at 2.47.
  • Cumulative Volume (CV) near new highs in S&P 500, S&P Emini, Dow 30, and NASDAQ Composite has underscored positive flavor of recent uptrend but, relative to pricing, CV has been less enthusiastic than price action since April 18 short-term lows.

Market Overview – What We Think:

  • Short-term trend remains positive, but looks increasingly tired for two important reasons: First, short-term Momentum has confirmed none of strength since May 7, and Second short-term volatility based on VIX data has not, for the first time since November 16 lows, made new low when prices made new highs. That divergence is significant and likely presages a short-term negative reversal and possibly turning point for larger, and mature, Intermediate Cycle.
  • Market is also “Overbought” on all cycles, a condition that cannot persist. And market has begun to look “spikey” on upside to suggest Minor Cycle could be approaching a high.
  • How Minor Cycle plays out will determine staying power of larger Intermediate Cycle that has been underway since November 16. But so long as Intermediate Cycle remains intact, all near-term pullbacks must be regarded as 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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