Technical indicators suggest possible stock market top

Weekly Review: MAAD & CPFL Analysis

 

Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1649.60

-17.87

-1.07%

Dow Jones Industrials

15303.10

-51.30

-.33%

NASDAQ Composite

3459.14

-39.83

-1.13%

Value Line Arithmetic Index

3727.43

-38.05

-1.01%

Minor Cycle* (Short-term trend lasting days to a few weeks) Neutral / Negative

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.

The intraday price highs reached last Wednesday in the S&P 500 (1687.18) and the other major indexes was probably the peak of the short-term rally that began on April 18 and the intermediate-term uptrend that began after the lows (1343.35—S&P 500) of last November 16. Fact is, there are times the stock market hands out small gifts. Price and indicator action last Wednesday was likely such a moment.

First, Wednesday’s price movement traced out what looked like a Key Reversal Day: “Prices open above the previous day’s close, make a new high and then close below the previous day’s low.” The last time such a pattern developed was October 11, 2007. While that previous peak was not as dramatic as the one last week, the ensuing decline was. While it remains to be seen how this current KRD signal will look in retrospect, it is in place and nothing but new highs above the Wednesday highs, and soon, will erase its potential significance. Which is? That after more than six months buyers may be running out of steam.

Market Overview – What We Know:

  • All of major indexes posted losses on week after creating new short and intermediate-term highs on an intraday basis last Wednesday.
  • All cycles remain positive, but Minor Cycle is on cusp of reversing to negative. Intermediate and Major Cycles remain historically “Overbought” with Minor Cycle only slightly less so.
  • Market volume increased 1.6% on week.
  • Our short-term volatility indicator created from VIX data is on verge of turning negative to reverse Minor Cycle positive.
  • But S&P 500 must decline below lower edge of 10-Day Price Channel (1648.25 through Tuesday) to suggest short-term negative. Intermediate Cycle remains positive until lower edge of 10-Week Price Channel (1538.83 through May 31).
  • Daily MAAD created new short to intermediate high last Tuesday, then moved lower over remainder of week. Daily MAAD Ratio was last moderately overheated at 1.36.
  • Daily CPFL rallied to short and intermediate-term high last Thursday. Indicator was “Overbought” at 2.17.
  • Cumulative Volume (CV) in S&P 500 and S&P Emini reached best levels since November lows last week, but on long-term basis both have underperformed S&P pricing. S&P Emini CV is most noticeably weakest and has only returned to breakdown levels created in early summer of 2011 following May 2011 highs.

Second, our short-term volatility indicator based on VIX data has moved to within inches of turning negative to not only reverse the Minor Cycle positive, but there is a suggestion index price strength since the April low was probably the finale of the uptrend begun last November. Why? Because for the first time since November that volatility indicator did not make new lows as prices made new highs to hint that the internal dynamics of the market are about to change dramatically.

Comments
comments powered by Disqus