Selling returns S&P to uptrend line begun last November

MAAD & CPFL Review

 

Market Snapshot for session ending 6-5-13
 

Last

Day Change

%Change

S&P 500 Index

1608.90

-22.48

-1.38%

Dow Jones Industrials

14960.59

-216.95

-1.43%

NASDAQ Composite

3401.47

-43.78

-1.27%

Value Line Arithmetic Index

3654.62

-52.19

-1.41%

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

Intermediate Cycle* (Medium trend lasting weeks to several months) Positive / Neutral

Major Cycle* (Long-term trend lasting several months to years) Positive

* Cycle status is based on S&P 500.

Market Overview – What We Know:

  • Sharp losses characterized trading in major indexes Wednesday with S&P 500 closing not far from intraday low. Dow 30 was biggest percentage loser on day with loss of 1.43%.
  • Market volume was down fractionally compared to Tuesday’s levels.
  • Short-term trend remains negative in all major indexes, but short-term Trading Oscillators have also dipped into “Oversold” territory. Intermediate and Major Cycles remain positive, but “Overbought.”
  • Our volatility indicator based on VIX data is negative for first time since early April.
  • To confirm reversal to positive on Minor Cycle, S&P 500 must to rally above upper edge of 10-Day Price Channel (1664.60 through Thursday). Intermediate Cycle in S&P 500 remains positive until 1548.17 through June 7.
  • Daily MAAD was negative by 1 to 19 Wednesday. Indicator remains below May 21 short to intermediate-term high and best level since March 2009. Daily MAAD Ratio was last into “Oversold” territory at .69.
  • Daily CPFL was negative by 1.67 to 1 Wednesday and remains below new short to intermediate-term high made last Thursday. CPFL Ratio was last moving into “Oversold” territory at .96.
  • Cumulative Volume (CV) in S&P 500 has returned precisely to uptrend line stretching back to November 16 S&P CV low.

Market Overview – What We Think:

  • Breakdown in index pricing following Tuesday’s “return action” move was no surprise and provided nice set up for Wednesday’s follow-through selling.
  • Given fact our proprietary Trading Oscillators, Daily MAAD and CPFL Ratios are getting “Oversold,” and fact pricing in S&P 500 and Cumulative Volume (CV) in S&P 500 have returned to uptrend lines stretching back to November, we would not be surprised to see near-term bounce develop soon. Strength would probably prove to be short-covering rally with limited upside potential.
  • In wake of likely Key Reversal Day on May 22, odds remain good that high (1687.18—S&P 500) was not only a Minor Cycle peak, but could also prove to be top of Intermediate Cycle uptrend begun after November 16 lows.
  • Reversal of our VIX-based volatility indicator to negative in conjunction with price negativity confirms unfavorable shift in market psychology on short to intermediate-term.

 

 

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

6/3

6/4

6/5

6/6

6/7

6/7

6/30

S&P 500 Index

BUY1664.69

BUY1666.97

BUY1665.35

BUY1664.60

BUY1663.31

SELL1548.17

SELL1374.74

Dow Jones Industrials

BUY15370.69

BUY15405.18

BUY15410.20

BUY15411.66

BUY15410.20

SELL14456.37

SELL12785.71

NASDAQ Composite

SELL3461.24

SELL3456.58

SELL3455.26

SELL3457.86

SELL3456.96

SELL3206.25

SELL2932.03

Value Line Index

SELL3719.12

SELL3721.19

SELL3719.99

SELL3721.69

SELL3720.57

SELL3451.90

SELL2949.32

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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