Market gains slightly, but short-term indicators falter

MAAD & CPFL Review

 

Market Snapshot for session ending 7-22-13
 

Last

Day Change

%Change

S&P 500 Index

1695.53

+3.44

+.20%

Dow Jones Industrials

15545.55

+1.80

+.01%

NASDAQ Composite

3600.38

+12.77

+.36%

Value Line Arithmetic Index

3941.38

+13.88

+.35%

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:

  • New closing highs were registered by all major indexes Thursday.
  • Market volume increased 4.5%.
  • To reverse short-term trend to negative, S&P 500 must sell below lower edge of 10-Day Price Channel (1641.08 thorough Friday). 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.
  • Daily MAAD rallied to new short to intermediate-term high Thursday with 11 issues positive and 8 negative. One was unchanged. Daily MAAD Ratio was into the lower regions of “Overbought” territory at 1.65.
  • Daily CPFL was negative Thursday by 1.10 to 1. 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 moving into “Overbought” territory at 1.71.
  • 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:

  • Short-term “Overbought” levels based on pricing, status of our VIX-based volatility indicator, and overheated short-term status of Daily MAAD and CPFL, could be suggestive of development of near-term top develop relatively soon.
  • Negative divergent action in Cumulative Volume (CV) in S&P 500, S&P Emini, and Dow 30 suggests for first time since November 16, 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 compared to other rally phases since last November.
  • 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
 

7/22

7/23

7/24

7/25

7/26

7/26

7/31

S&P 500 Index

SELL 1649.95

SELL 1656.31

SELL 1662.65

SELL 1668.27

SELL 1673.05

SELL 1604.19

SELL 1398.13

Dow Jones Industrials

SELL 15247.59

SELL 15297.70

SELL 15342.73

SELL 15382.48

SELL 15415.94

SELL 14901.12

SELL 12986.65

NASDAQ Composite

SELL 3520.11

SELL 3538.44

SELL 3555.89

SELL 3571.13

SELL 3577.74

SELL 3373.62

SELL 2969.08

Value Line Index

SELL 3804.37

SELL 3823.99

SELL 3841.52

SELL 3858.92

SELL 3874.23

SELL 3630.44

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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