Stock market friendly to bulls, but shrinking volume is warning

MAAD & CPFL Review

 

Market Snapshot for session ending 7-1-13
 

Last

Day Change

%Change

S&P 500 Index

1614.96

+8.68

+.54%

Dow Jones Industrials

14974.96

+65.36

+.44%

NASDAQ Composite

3434.49

+31.24

+.92%

Value Line Arithmetic Index

3720.79

+39.86

+1.08%

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

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.

Market Overview – What We Know:

  • Major indexes were higher again Monday, but trading volume compared to last Friday’s levels decreased by nearly 44%.
  • Market volume was little changed from Wednesday’s levels.
  • S&P 500 must rally above upper edge of 10-Day Price Channel (1618.42 through Tuesday) to suggest a more favorable tone on near-term trend. Intermediate Cycle remains positive until 1599.86 through July 5.
  • Our short-term volatility indicator based on VIX data remains negative, but has returned toward “Neutral” levels over past few sessions.
  • Daily MAAD was positive by 14 to 6 Monday and remains above uptrend line stretching back to November 16 market lows. Indicator, via Monday’s action, also broke slightly above a near-term downtrend line stretching back to May 21 high. Daily MAAD Ratio was marginally “Overbought” at 1.15.
  • Daily CPFL data was positive by 1.20 to 1 Monday, but remains below new short to intermediate-term high reached June 11. Indicator also remains below uptrend line stretching back to November lows. Daily CPFL Ratio was “Oversold” at .70.
  • Cumulative Volume in S&P 500 and S&P Emini has continued to underperform, despite strength over past several sessions. Volume has tended to shrink on rallies while increasing on weakness.

Market Overview – What We Think:

  • S&P 500 pricing continues to inch back toward a defined short-term downtrend line (1640) stretching back toward May 21 high (1687.18) which, if broken on upside, would give market a more positive outlook.
  • But would index be able to muster enough strength to rally back above May 21 high? We doubt it.
  • In favor of bulls is fact short-term trend remains “Oversold,” but only problem there is that “Oversold” early in Intermediate Cycle reversal to negative can stay that way and is simply an indication of negative market Momentum rather than a buying opportunity.
  • All told, strength over past several sessions could prove to be near-term rebound that will ultimately have little effect on larger Intermediate Cycle that continues to look as if it topped out May 22. We also do not think May 22 highs on Intraday, Minor, and Intermediate Cycle will be surpassed anytime soon.
  • Given recent market weakness, odds are increasingly good Key Reversal Day made May 22 in all of major indexes will prove to be accurate market reversal point on at least Intermediate Cycle. Depending on how intermediate trend plays out, staying power of Major Cycle advance begun in March 2009 could then become an issue.

Index Price Channel Stops (10-Bar MAs of Highs/Lows ) Weekly Monthly
 

7/1

7/2

7/3

7/4

7/5

7/5

7/31

S&P 500 Index

BUY 1625.43

BUY 1618.42

BUY 1614.62

Hol

BUY 1613.79

SELL 1599.86

SELL 1398.13

Dow Jones Industrials

BUY 15096.30

BUY 15033.32

BUY 15001.41

Hol

BUY 14993.00

SELL 14867.94

SELL 12986.65

NASDAQ Composite

BUY 3424.51

BUY 3409.62

BUY 3401.31

Hol

BUY 3400.41

SELL 3433.35

SELL 2969.08

Value Line Index

BUY 3699.77

BUY 3682.94

BUY 3672.32

Hol

BUY 3672.04

SELL 3590.98

SELL 3030.14

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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