Market suffers slightly Tuesday, but not definitively

MAAD & CPFL Review

 

Market Snapshot for session ending 7-16-13
 

Last

Day Change

%Change

S&P 500 Index

1676.26

-6.24

-.37%

Dow Jones Industrials

15451.85

-32.40

-.21%

NASDAQ Composite

3598.50

-8.99

-.25%

Value Line Arithmetic Index

3884.57

-17.75

-.45%

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

Intermediate Cycle* (Medium trend lasting weeks to several months) Positive

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

* Cycle status is based on S&P 500.

Market Overview – What We Know:

  • Red ink crept into market Tuesday with all of major indexes experiencing marginal losses.
  • Market volume rose 7.1% compared to Monday.
  • Short-term trend is positive in S&P 500. To suggest reversal to negative index must sell below lower edge of 10-Day Price Channel (1624.51 through Wednesday). Intermediate Cycle remains positive until S&P declines below lower edge of 10-Week Price Channel (1606.93 through July 19).
  • VIX-based short-term volatility indicator remains in higher risk zone that has historically reflected near-term vulnerability.
  • Daily MAAD was unchanged Tuesday with 10 issues higher and 10 lower. Indicator rallied to best level since Last November 16 Monday and since March 2009. Daily MAAD Ratio was moderately “Overbought” at 1.53.
  • Despite marginal market losses Tuesday, Daily CPFL was positive by 2.29 to 1. But indicator continues to hold below new short to intermediate-term high reached June 11 and uptrend line stretching back to November lows. Daily CPFL Ratio was last moderately “Overbought” at 1.55.
  • Cumulative Volume (CV) in S&P 500, S&P 500 Emini futures contract, and Dow 30 has remained weak relative to pricing during recent short-term advance.

Market Overview – What We Think:

  • While Tuesday’s marginal selling was not definitive, given short-term “Overbought” levels based on pricing, status of our VIX-based volatility indicator, and moderately overheated short-term status of Daily MAAD and CPFL, we would not be surprised to see near-term top develop relatively soon.
  • Negative divergent action in Cumulative Volume (CV) in S&P 500, S&P Emini, and Dow 30 continues to suggest for first time since November 2012 Intermediate Cycle lows that current short-term rally is somehow different than all previous short-term moves that were preceded by Minor Cycle corrective action. Weaker hands appear to have driven current rally upward.
  • As a consequence, it remains to be seen if new highs are reflecting misplaced enthusiasm into Intermediate Cycle end game, or are simply a resumption of long-term advance on both Intermediate and Major Cycles.

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

7/15

7/16

7/17

7/18

7/19

7/19

7/31

S&P 500 Index

SELL 1609.81

SELL 1617.47

SELL 1624.51

SELL 1632.03

SELL 1641.08

SELL 1606.93

SELL 1398.13

Dow Jones Industrials

SELL 14924.66

SELL 14992.63

SELL 15053.82

SELL 15111.41

SELL 15179.81

SELL 14924.58

SELL 12986.65

NASDAQ Composite

SELL 3420.07

SELL 3436.45

SELL 3452.51

SELL 3474.58

SELL 3497.63

SELL 3372.92

SELL 2969.08

Value Line Index

SELL 3690.06

SELL 3710.80

SELL 3732.47

SELL 3753.18

SELL 3779.80

SELL 3629.13

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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