Stock market finds support at trendline; new highs must follow

Weekly Review: MAAD & CPFL Analysis

 

Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1643.38

+12.64

+.77%

Dow Jones Industrials

15248.12

+132.55

+.87%

NASDAQ Composite

3469.22

+13.31

+.38%

Value Line Arithmetic Index

3731.51

+11.79

+.31%

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

After five days of trading, price action in the S&P 500 last week left the bellwether index squarely in No Man’s Land. On the heels of last Thursday’s intraday turnaround to the upside near 12:30 with follow-through buying into Friday, the S&P remains below its new short to intermediate-term high (1687.18) created May 22 and intermediate-term trend line support at last Thursday’s low (1598.23). A resumption of selling with weakness below 1598.23 would suggest strength at the end of last week was merely a bout of short-covering. Weakness below last week’s near-term support would also suggest an end to the Intermediate Cycle uptrend initiated last November 16 (1343.25—S&P 500).

Market Overview – What We Know:

  • Despite mid-week selling, all of major indexes recovered last week to post gains. Dow Jones Industrial Average was biggest gainer (+.87%). No index made new highs, but all remain in Intermediate Cycle uptrends.
  • Market volume was higher compared to previous week because of truncated trading week, but average daily basis was actually lower than previous weekly period.
  • Minor Cycle remains negative, but larger Intermediate and Major Cycles remain positive and “Overbought” in all indexes.
  • Short-term volatility indicator based on VIX data remains negative, but will not be able to withstand much more buying on near-term before it will flip back into positive territory.
  • For S&P 500 to reverse to positive, it must rally above upper edge of 10-Day Price Channel (1658.67 through Monday). Intermediate Cycle remains positive until lower edge of 10-Week Price Channel (1561.97 through June 14).
  • Daily MAAD rallied marginally higher at end of last week, but continues to hold below its May 21 short to intermediate-term high. Daily MAAD Ratio remains “Oversold” (.98). Weekly MAAD tapped out new intermediate-term high last week and best level since March 2009, but indicator remains well below high made week of July 13, 2007. Weekly MAAD Ratio remains ”Overbought“ (1.70).
  • CPFL remains below new short to intermediate-term high reached May 30 while remaining somewhat stronger than index pricing. New high in CPFL would be bullish. Daily CPFL Ratio was “Neutral” (1.00) while Weekly CPFL Ratio was moderately “Overbought” (1.59)

Underscoring a negative resolution of price action, there is that May 22 high (1687.18) in the S&P created at the same day as a possible Key Reversal Day. Given the fact the last time a KRD surfaced was at the peak of the bull market back on October 11, 2007, this most recent creation has some weight attached to it.

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