Stock market lacks conviction heading into July 4th holiday

MAAD & CPFL Review

 

Market Snapshot for session ending 7-2-13
 

Last

Day Change

%Change

S&P 500 Index

1614.08

-.88

-.05%

Dow Jones Industrials

14932.41

-42.55

-.28%

NASDAQ Composite

3433.39

-1.09

-.03%

Value Line Arithmetic Index

3712.26

-8.53

-.23%

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

Market Overview – What We Know:

  • Marginal losses characterized price action in major indexes Tuesday. Down .28%, Dow Jones 30 was biggest loser on day.
  • Market volume rose 4.6% compared to Monday’s levels. Activity will likely diminish over balance of week in response to July 4 holiday.
  • S&P 500 must rally above upper edge of 10-Day Price Channel (1614.62 through Wednesday) to suggest 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 has moved from negative territory back to slightly positive. Toehold is tentative, however.
  • Daily MAAD was negative by 7 to 14 Tuesday 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 near “Neutral” at .92.
  • Daily CPFL data was negative by 1.55 to 1 Tuesday and 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 .64.
  • Cumulative Volume in S&P 500 and S&P Emini has continued to underperform pricing, 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 remains just below 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, near-term. Upper edge of 10-Day price channel, point to be broken on statistical front to give market more positive tone, is also in sight.
  • But would index be able to muster enough strength to rally back above May 21 high? That is the lingering question. 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

BUY1625.43

BUY1618.42

BUY1614.62

Hol

BUY1613.79

SELL1599.86

SELL1398.13

Dow Jones Industrials

BUY15096.30

BUY15033.32

BUY15001.41

Hol

BUY14993.00

SELL14867.94

SELL12986.65

NASDAQ Composite

BUY3424.51

BUY3409.62

BUY3401.31

Hol

BUY3400.41

SELL3433.35

SELL2969.08

Value Line Index

BUY3699.77

BUY3682.94

BUY3672.32

Hol

BUY3672.04

SELL3590.98

SELL3030.14

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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