Stock market range-bound with slight advantage to bears

Weekly Review: MAAD & CPFL Analysis

Market Overview – What We Think:

  • While last weeks modest rebound in major indexes tempered some of negativity on Minor Cycle since May 22 short-term highs, that same near-term trend remains negative, albeit modestly “Oversold.”
  • Lacking strength that will ultimately carry index pricing back above May highs and potential Key Reversal Day (KRD) highs (1687.18-S&P 500), only presumption left is that May highs were also top of Intermediate Cycle uptrend begun last November 16 and that tone of market could remain negative until Intermediate Cycle slips into buying zone.
  • How intermediate trend plays out will ultimately determine staying power of Major Cycle advance begun in March 2009.
  • Fact sellers have continued to push prices lower after each upside attempt and that market remains “Overbought” on larger cycles is indication of larger cycle vulnerability. Market’s inability to overcome sellers could be a clue environment has begun to shift from one of buying on weakness to one of selling on strength.
  • Marked increase in trading volume on downside during recent decline as reflected in Cumulative Volume suggests S&P 500, S&P 500 Emini, and Dow Jones 30 should be trading lower that current bids suggest. Last time such volume losses developed was during 2008-2009 bear market.

There are other pieces to the current near-term puzzle that are evident. Our Most Actives Advance Decline Line (MAAD) and our Call/Put Dollar Value Flow Line (CPFL) Daily Ratios are not far from “Neutral/Oversold” levels (1.25 and .68, respectively) to suggest there could still be some upward bounce in the market. Short-term Momentum in the S&P is near “Neutral” and both of our price-based Trading Oscillators are also “Neutral/Oversold.” In addition, all of the key indexes we follow managed to bounce higher after either penetrating the lower edges 10-Week Price Channels (S&P and Dow).or slightly teasing those points (NASDAQ Composite and Value Line index). That latter evidence underscores the fact statistical support came into play just before last weeks rally.

And from a purely charting point-of-view, price action in the S&P has traced out what looks like a perfect a-b-c pullback from the May 22 high. May 22 (1687.18) to June 6 (1598.23) constituted the “a” leg of the formation. The “b” leg lasted from June 6 to June 18 (1654.19). The “c” from June 18 to June 24 (1560.33) finished the move and completed selling to a downside measured move target at 1565.24.

Daily S & P 500 with Cumulative Volume (CV)

Weekly S & P 500 with Cumulative Volume (CV)

So has selling since May 22 been merely a pullback within the context of a still positive, but damaged, Intermediate Cycle? Or is something else developing?

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