Short-term stock market trend gives more ground

Weekly Review: MAAD & CPFL Analysis

 

Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1592.43

-34.30

-2.10%

Dow Jones Industrials

14799.40

-270.78

-1.79%

NASDAQ Composite

3357.25

-66.31

-1.93%

Value Line Arithmetic Index

3623.90

-81.41

-2.19%

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

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

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

* Cycle status is based on S&P 500.

Was the Key Reversal Day (KRD) put in place back on May 22 (1687.18—S&P 500 intraday) the top of the long-term advance begun in March 2009? Too soon to tell. How about the next larger Intermediate Cycle? Probably. Well then, it’s a certainty the smaller Minor Cycle is negative? Absolutely. So goes the argument. And with it come some absolutes that developed along with last week’s sharp market losses.

After a little more than three weeks of net selling, all of the major indexes we follow declined toward the lower edge of 10-Week Price Channels (1575.70—S&P 500) before they found some stability and rallied marginally last Friday. In fact, S&P cash came to within exactly 2 points of its Price Channel low before recovering. On the week it was the Value Line index that was the biggest loser with a net loss of 2.19%. What is more important, however, is that in just 22 sessions the S&P has lost 5.9%, the Dow 30 4.8%, the NASDAQ Composite 4.9%, and the VAY 5.0%.

Market Overview – What We Know:

  • Major indexes suffered sharp losses last week. Value Line index was biggest loser (2.19%) with S&P 500 coming in a close second (-2.10%).
  • Trading volume rose more than 32% compared to previous five-day period. Activity last Thursday and Friday during largest portions of last week’s selling rose nearly 100%.
  • Minor Cycle is currently negative and S&P 500 must rally above upper edge of 10-Week Price Channel (1640.82 through Monday) to reverse trend to positive. Intermediate Cycle remains positive but threatened and must decline below 1588.94 (through June 28) in the S&P to reverse extant trend to negative. Major Cycle remains positive and historically “Overbought.”
  • Our short-term volatility indicator based on VIX data remains negative.
  • Daily MAAD moved lower balance of last week and remains below its May 21 short-term high, but above an uptrend line put in place last November. Daily MAAD Ratio was last in “Oversold” territory at .75. Weekly MAAD Ratio was last marginally “Overbought” at t 1.27.
  • Daily CPFL rallied to new short to intermediate-term high June 11 and has declined at last plot to levels not seen since the middle of May. Daily CPFL Ratio was last “Oversold” at .72 with Weekly CPFL Ratio marginally “Overbought” at 1.18.
  • Cumulative Volume (CV) in S&P Emini futures contract was last plotted at levels not seen since last January when S&P cash index was near 1410.

In the wake of last week’s losses chart and statistical damage is evident. The first most noticeable mischief is the sharp increase in trading volume. Activity last Thursday and Friday was nearly doubled daily volume over the past several weeks. On the week, that was a 32% increase over activity for the previous five sessions. More importantly, Cumulative Volume (CV) in the S&P 500 declined back to levels not seen since last March when the S&P was trading nearly 50 points below Friday’s levels. In the S&P 500 Emini futures contract the damage was even more severe. That last time Emini CV was so low was back in January when S&P cash was trading just points above 1400. Similar CV losses surfaced in the Dow Jones 30. Of the majors, Only CV in the NASDAQ Composite has held up relatively well.

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