Short-term stock trend shifts more toward negative Monday

MAAD & CPFL Review

 

Market Snapshot for session ending 7-29-13
 

Last

Day Change

%Change

S&P 500 Index

1685.33

-6.32

-.37%

Dow Jones Industrials

15521.97

-36.86

-.24%

NASDAQ Composite

3599.14

-14.02

-.39%

Value Line Arithmetic Index

3897.89

-21.52

-.55%

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

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:

  • Weakness in major indexes Monday tilted odds a bit more in favor of negative resolution of Minor Cycle underway since June 24.
  • Market volume declined 9.9%.
  • NYSE advance/decline data was negative by 2.36 to 1 with NYSE up/down volume negative by 2.04 to 1.
  • Short-term trend would become unfavorable if S&P 500 declines below lower edge of 10-Day Price Channel (1681.55 through Tuesday). Intermediate Cycle remains positive until S&P sells below lower edge of 10-Week Price Channel (1597.77 through August 2).
  • VIX-based short-term volatility indicator remains in zone of higher risk.
  • Daily MAAD was negative Monday. Eight issues were higher with 11 lower. One was unchanged. Indicator remains below peak made July 18, but could hit new high for move with only slightly more buying. Daily MAAD Ratio was near “Neutral” at .98.
  • Daily CPFL was negative Monday by 2.28 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 was marginally “Overbought” at 1.23.
  • Cumulative Volume (CV) in S&P 500, S&P 500 Emini futures contract, and Dow 30 has remained weak relative to pricing since short-term advance began on June 24.

Market Overview – What We Think:

  • Weakness in major indexes Monday, in conjunction with fact none of indexes has been able to make new highs over past several sessions, gave more negative definition to short-term trend. But since all remain above lower edges of 10-Day Price Channels, albeit “Overbought” on Minor Cycle, jury is still out on short-term rally begun June 24.
  • Fact indexes remain so close to recent highs could mean, however, short-term advance begun on June 24 might still have some life left. And fact that Daily MAAD Ratio has corrected back to “Neutral” could provide some statistical underpinnings to more positive outlook.
  • Nonetheless, ongoing failure of indexes to make new highs could tip scales of at least a short-term correction. 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 could be evidence of a more bearish outcome.
  • And negative divergent action in Cumulative Volume (CV) in S&P 500, S&P Emini, and Dow 30 could be a hint short-term rally is somehow different from all previous Minor Cycle moves since intermediate lows were made last November 16. Weaker hands appear to have driven prices higher since June 24, as compared to other rally phases over past several months.

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

7/29

7/30

7/31

8/1

8/2

8/2

8/31

S&P 500 Index

SELL 1677.77

SELL 1681.55

SELL 1682.89

SELL 1683.14

SELL 1682.24

SELL 1597.77

SELL 1422.19

Dow Jones Industrials

SELL 15444.33

SELL 15470.90

SELL 15483.15

SELL 15483.56

SELL 15471.95

SELL 14849.26

SELL 13195.39

NASDAQ Composite

SELL 3583.48

SELL 3585.28

SELL 3584.77

SELL 3584.00

SELL 3583.11

SELL 3365.13

SELL 3007.61

Value Line Index

SELL 3888.59

SELL 3900.85

SELL 3904.79

SELL 3906.55

SELL 3905.69

SELL 3627.41

SELL 3107.83

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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