Stock market defines buy/sell points on intermediate trend

Weekly Review: MAAD & CPFL Analysis

Market Overview – What We Think:

  • We suspect that May 22 short-term high and potential KRD day will also prove to be peak of Intermediate-term uptrend begun last November 16.
  • Fact that sellers continue to push prices lower after each upside attempt and that market remains “Overbought” on larger cycles is suggestion net short-term weakness could morph into larger cycle negativity.
  • Also, in face of increasing negativity by volatility-based indicators, market’s inability to overcome sellers could be an indication environment has begun to shift from one of buying on weakness to selling on strength.
  • Question now is whether or not S&P 500 will have enough staying power to hold above June 6 low (1598.23) while attracting enough buying power to overcome May 22 high (1687.18) and possible Key Reversal Day.
  • We think not. While some near-term stats such as an “Oversold” Minor Cycle and appearance of more positive tone in CPFL and MAAD on near-term would seem to lend more positive flavor to market, we suspect price action in sessions just ahead may prove to be topping action in mature intermediate term rally.
  • Nonetheless, until negative short term trend morphs into intermediate-term negative, we must regard short term weakness as just another minor corrective phase.

But there are concerns. “Oversold” conditions on the Minor Cycle can persist when an Intermediate Cycle is switching from positive to negative. In other words, “negative” readings in the Daily MAAD and CPFL Ratios are not so much “Oversold” as they are unfavorable. Those readings could simply remain in negative territory while holding below a “Neutral” Ratio reading of 1.00 without resulting in any buying opportunities. In fact, investors presuming near-term “Oversold” conditions are a signal to get back into the market, could be disappointed when the larger Intermediate Cycle confirms a negative reversal and rolls over to negative. At that point market psychology would be changing from one of “Buying on weakness” to one of “Selling on strength.”

Daily S & P 500 with Cumulative Volume (CV)

Weekly S & P 500 with Cumulative Volume (CV)

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