Market weakness pushing indexes toward failsafe levels

MAAD & CPFL Review

 

Market Snapshot for session ending 8-7-13
 

Last

Day Change

%Change

S&P 500 Index

1690.91

-6.46

-.38%

Dow Jones Industrials

15470.67

-48.07

-.31%

NASDAQ Composite

3654.00

-11.76

-.32%

Value Line Arithmetic Index

3924.16

-25.97

-.66%

Minor Cycle* (Short-term trend lasting days to a several 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:

  • Losses prevailed in major indexes again Wednesday. Market volume increased 3.6% with NYSE advances/declines negative by 2.32 to 1 and NYSE up/down volume negative by 2.37 to 1.
  • To turn Minor Cycle negative, S&P 500 must decline below lower edge of 10-Day Price Channel (1683.94 through Thursday). Intermediate Cycle remains positive until S&P sells below lower edge of 10-Week Price Channel (1598.94 through August 9).
  • Our VIX-based short-term volatility indicator remains in zone of higher risk.
  • Daily MAAD was lower Wednesday with 6 issues positive and 14 negative. Best level since March 2009 was reached Monday. Indicator remains in intermediate-term uptrend in wake of index lows reached last November 16. Daily MAAD Ratio was last “Neutral” at 1.00.
  • Daily CPFL was negative Wednesday by 2.49 to 1. Indicator remains below new short to intermediate-term high made June 11 and uptrend line stretching back to November lows. Daily CPFL Ratio was “Oversold” territory at .75.
  • Cumulative Volume (CV) made new high in S&P 500 August 1, but has yet to confirm in S&P 500 Emini futures contract and Dow 30 relative to pricing in short-term advance begun June 24.

Market Overview – What We Think:

  • Net selling over past three sessions has moved index pricing lower toward bottom edge of 10-Day Price Channels to set up possible negative resolution of Minor Cycle and end to short-term uptrend begun June 24. Dow 30 is in greatest jeopardy, then S&P 500, Value Line index, and NASDAQ Composite that remains strongest of majors.
  • If short-term trend slips into negative territory, staying power of larger Intermediate Cycle begun last November 16 comes into play.
  • If combined with breaking of uptrend since last November 16 by Daily MAAD, odds would be excellent intermediate-term advance that is about to enter its ninth month would be over.
  • There is also potential for developing problem on larger cycles in that fall time frame has historically been backdrop for some of worst declines in stock market history. Think October 1929 and 2007 with secondary reactions in 1987 and 1990, the latter two peaking in late summer with subsequent lows occurring in October. A lesser known pullback began developing in March 1937 and matured into the fall of that year.
  • Failing short-term Momentum, unfavorable divergent action in CV in Dow 30 and S&P Emini, and vulnerability of our short-term VIX-based indicator speak for negativity on flip side. And short-term price stats continue to suggest “Overbought” conditions.

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

8/5

8/6

8/7

8/8

8/9

8/9

8/31

S&P 500 Index

SELL 1682.34

SELL 1682.47

SELL 1682.86

SELL 1683.94

SELL 1686.91

SELL 1598.94

SELL 1422.19

Dow Jones Industrials

SELL 15474.45

SELL 15474.89

SELL 15478.70

SELL 15482.49

SELL 15495.56

SELL 14851.38

SELL 13195.39

NASDAQ Composite

SELL 3584.24

SELL 3587.81

SELL 3594.42

SELL 3605.87

SELL 3618.31

SELL 3375.96

SELL 3007.61

Value Line Index

SELL 3903.74

SELL 3902.70

SELL 3903.38

SELL 3905.21

SELL 3915.65

SELL 3640.58

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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