Market gets trendline bounce in negative minor cycle

MAAD & CPFL Review

 

Market Snapshot for session ending 6-6-13
 

Last

Day Change

%Change

S&P 500 Index

1622.56

+13.66

+.85%

Dow Jones Industrials

15040.62

+80.03

+.53%

NASDAQ Composite

3424.05

+22.57

+.66%

Value Line Arithmetic Index

3691.62

+36.99

+1.01%

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:

  • Some of Wednesday’s sharp losses were recovered by major indexes Thursday, but short-term trend remains negative. Intermediate and Major Cycle are still positive.
  • Market volume was down fractionally compared to Wednesday’s levels.
  • Short-term Trading Oscillators have dipped into “Oversold” territory, but Intermediate and Major Cycles remain “Overbought.”
  • Our volatility indicator based on VIX data is negative for first time since April.
  • To confirm reversal to positive on Minor Cycle, S&P 500 must to rally above upper edge of 10-Day Price Channel (1663.31 through Friday). Intermediate Cycle in S&P 500 remains positive until 1548.17 through June 7.
  • Daily MAAD was positive by 4 to 1 Thursday (16 up and 4 down), but indicator continues to hold below May 21 short to intermediate-term high and best level since March 2009. Daily MAAD Ratio was last in “Oversold” territory at .89.
  • Daily CPFL was positive by 1.18 to 1 Thursday. Indicator remains below new short to intermediate-term high made May 30. CPFL Ratio was last “Neutral” at 1.00

Market Overview – What We Think:

  • Short-term “Oversold” conditions and Thursday’s upward bounce from intermediate-term trendline stretching back to November 16 lows have left larger Intermediate Cycle in limbo.
  • Short-term trend remains negative, but if Thursday’s intraday S&P 500 low (1598.23) continues to hold, case could be made worst of short-term weakness has been seen. How market then performs on upside could determine staying power of larger Intermediate Cycle.
  • If May 22 intraday S&P 500 high (1687.18) holds on any subsequent strength, however, odds would be good an intermediate-term high has been put in place.
  • There is another possible scenario short of the majors making new highs: renewed selling develops, Thursday’s intraday S&P low is fractured on downside, and intermediate Cycle in effect since November 16 is reversed to negative.
  • No matter how current pricing develops, nothing but S&P strength above May 22 high would re-assert intermediate-term uptrend.
  • But in wake of likely Key Reversal Day on May 22, odds remain good that high was not only Minor Cycle peak, but was also 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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