Market fiddles some more; indicators still look OK

MAAD & CPFL Review

 

Market Snapshot for session ending 8-13-13
 

Last

Day Change

%Change

S&P 500 Index

1694.16

+4.69

+.28%

Dow Jones Industrials

15451.01

+31.33

+.20%

NASDAQ Composite

3684.44

+14.49

+.39%

Value Line Arithmetic Index

3952.81

-.81

-.02%

Minor Cycle* (Short-term trend lasting days to a few weeks) 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:

  • Mixed readings persisted in major indexes Tuesday. S&P 500 and Dow 30 gained marginally, but while S&P crawled back into “Neutral” territory, Dow 30 remains negative on Minor Cycle. NASDAQ Composite was biggest gainer and could make new highs. Value Line index lost a bit, but is still positive on short-term.
  • Market volume rose 11.6%. NYSE advance/decline data and NYSE Up/Down volume were negative by 1.56 to 1 and 1.34 to 1, respectively.
  • To assume more favorable tone on Minor Cycle, S&P 500 must rally above upper edge of 10-Day Price Channel (1701.93 through Wednesday). Intermediate Cycle remains positive until S&P sells below lower edge of 10-Week Price Channel (1604.48 through August 16).
  • Our VIX-based short-term volatility indicator remains in zone of higher risk.
  • Daily MAAD was even Tuesday with 10 issues up and down. Indicator rallied to new high and best level since March 2009 on Monday. Indicator remains in intermediate-term uptrend in effect since last November 16. Daily MAAD Ratio was marginally “Overbought” at 1.20.
  • Daily CPFL was fractionally negative Tuesday. 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” at .62.
  • 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:

  • Fractional gains in S&P and Dow 30 Monday erased some of short-term negativity that had been brewing, but there is still negative tone in Dow. S&P’s move back into more “Neutral” territory in conjunction with move back toward recent highs by COMPX is encouraging, but with more new lows (198) Tuesday than new highs (139), market bulls need to prove their case.
  • Adding to bullish mix is fact that Daily MAAD rallied to new high Monday with even readings Tuesday. Indicator remains in short and intermediate-term uptrends and has yet to put in place any sort of negative divergence, a development that is potentially bullish.
  • As consequence, it remains to be seen if marginal weakness in bluer chips over past several days is premature and merely a brief pullback prior to another run to upside, or if it is prescient in front of more concerted near-term market weakness. In latter instance, COMPX and VAY seem to be denying bearish outcome.
  • To seriously threaten Intermediate Cycle positive in effect since last November 16, we must first see Minor Cycle turn negative with near-term weakness developing that would then threaten lower edge of 10-Week Price Channels. In that vein, ALL of major indexes should participate on downside.
  • In background, there is potential for developing problems on larger cycles in that fall period has historically been backdrop for some of worst declines in stock market history. Think October 1929, October 1987, and October 2007.

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

8/12

8/13

8/14

8/15

8/16

8/16

8/31

S&P 500 Index

SELL 1690.11

BUY 1702.72

BUY 1701.93

BUY 1702.09

BUY 1701.94

SELL 1604.48

SELL 1422.19

Dow Jones Industrials

BUY 15512.17

BUY 15507.27

BUY 15494.27

BUY 15482.05

BUY 15457.43

SELL 14896.81

SELL 13195.39

NASDAQ Composite

SELL 3632.37

SELL 3639.88

SELL 3642.14

SELL 3642.22

SELL 3649.04

SELL 3393.80

SELL 3007.61

Value Line Index

SELL 3926.39

SELL 3930.76

SELL 3930.23

SELL 3930.88

SELL 3932.12

SELL 3663.03

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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