Market back toward highs to challenge bearish assumptions

MAAD & CPFL Review

 

Market Snapshot for session ending 7-25-13
 

Last

Day Change

%Change

S&P 500 Index

1690.25

+4.31

+.26%

Dow Jones Industrials

15555.61

+13.36

+.09%

NASDAQ Composite

3605.18

+25.58

+.71%

Value Line Arithmetic Index

3933.68

+26.24

+.67%

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:

  • Major indexes finished higher Thursday and all remain within range of new highs reached within past several days. Market internals including advances and declines and up/down volume were also positive.
  • Market volume increased 8% compared to Wednesday’s levels.
  • Short-term trend would take on more negative tone if S&P 500 declines below lower edge of 10-Day Price Channel (1673.05 through Friday). Intermediate Cycle remains positive until S&P sells below lower edge of 10-Week Price Channel (1604.19 through July 26).
  • VIX-based short-term volatility indicator remains in zone of higher risk.
  • Daily MAAD was positive Thursday with 13 issues positive and 7 negative. Indicator remains below peak made July 18, but could hit new high for move with only slightly more buying. Daily MAAD Ratio has moved lower over past several sessions and was last toward “Neutral” at 1.10.
  • Daily CPFL was negative Thursday by 1.35 to 1. Indicator remains below new short to intermediate-term high reached June 11, and uptrend line stretching back to November lows. Daily CPFL Ratio remains “Overbought” territory at 1.52.
  • 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:

  • Fact that major indexes remain so close to recent highs after a couple of sessions of brief corrective action and some recovery could mean short-term advance begun on June 24 might still have some life. Fact that Daily MAAD Ratio has corrected back to “Neutral” could provide some statistical underpinnings to more positive outlook.
  • But it remains to be seen, lacking new highs, whether or not improvement Thursday will prove to be merely some “return action” toward those highs prior to more concerted weakness, or if it is preceding more buying.
  • Lingering short-term “Overbought” levels based on pricing, vulnerability of our VIX-based volatility indicator, and fact short-term Momentum has confirmed none of strength since July 11 may be evidence of a more bearish outcome, however.
  • And negative divergent action in Cumulative Volume (CV) in S&P 500, S&P Emini, and Dow 30 suggests current short-term rally is somehow different than all previous Minor Cycle moves since intermediate lows were made last November 16 in that weaker hands appear to have driven current near-term advance, as compared to other rally phases over past several months.
  • Given weak underpinnings of recent rally in conjunction with indicator divergences, it’s possible when this Minor Cycle rally peaks and heads lower, that action could also be coincident with end to Intermediate Cycle uptrend begun last November.

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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