On the bullish side of possible upcoming scenarios, all cycles remain positive. On the other hand, all are also “Overbought,” except for the Daily Ratios in our Most Actives Advance/Decline (MAAD) and Call/Put Dollar Value Flow Line (CPFL) series. There, short-term levels are “Neutral” to slightly “Oversold.” That was the short-term status of both into the June lows and virtually all of the Minor Cycle lows over the past several years. There is also the fact that MAAD has remained relatively unscathed a defined uptrend since last November and despite the fact that via the May/June pullback in the broad market when the S&P 500 and the Dow 30 broke below their uptrend lines, MAAD did not. In fact, it wouldn’t take much more buying to move MAAD to a new high and its best level since March 2009.
Market Overview – What We Think:
- Developing negative indicator and pricing evidence could soon tip scales in favor of new negative short-term trend. Newly created Minor Cycle negative in Dow 30 with short-term Momentum and Cumulative Volume (CV) failures in face of low volatility could bring short-term advance begun June 24 to an end.
- Failure of Cumulative Volume (CV) is S&P Emini has been especially noticeable over past several weeks. Sharp drop in Emini CV from May highs to June lows with coincident break below uptrend stretching back to November, with only modest recovery since then, is not bullish.
- Indicators like our short-term VIX-based volatility indicator continue to suggest potential for near-term corrective action. That tone is offset by fact same indicator on Intermediate Cycle via Weekly data has moved back into positive territory after brief negative flurry after May highs.
- But while Trading Oscillators based on pricing are also “Overbought” on Minor, Intermediate, and Major Cycles, more sensitive measurements in Daily MAAD and CPFL remain toward “Neutral,” or were only marginally overheated. That positive flavor could accrue to benefit of extant uptrends.
- Clearly, how pricing plays out relative to defined 10-Day and 10-Week Price Channels will determine whether or not indicator tonality is prescient or premature.
There are also contradictions evident in our VIX-based volatility indicator (VBVI) that has been in a short-term ascendant mode since the June 24 lows. It made a low the second weak of July, because it operates inversely to prices, and then eked out slightly lower levels until August 5 when it began moving upward again as the market weakened slightly. VBVI is still bearish on the Minor Cycle, but is still positive on the Intermediate Cycle although it is not in a buying zone. After threatening longer-term negativity into the May/June pullback, VBVI peaked the week of July 5 and then began moving lower again, as prices rallied, to underscore the market’s positive tone.
Daily S & P 500 with Cumulative Volume (CV)
Weekly S & P 500 with Cumulative Volume (CV)