Major stock market indexes resolve near-term; intermediate cycle now issue

Weekly Review: MAAD & CPFL Analysis

 

Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1655.83

-35.59

-2.10%

Dow Jones Industrials

15081.47

-344.04

-2.23%

NASDAQ Composite

3602.78

-57.33

-1.57%

Value Line Arithmetic Index

3863.73

-80.50

-2.04%

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

Intermediate Cycle* (Medium trend lasting weeks to several months) Positive / Neutral

Major Cycle* (Long-term trend lasting several months to years) Positive

Cycle status is based on S&P 500

For the first few sessions of last week’s trading it looked as if there just might be a chance weakness in the Dow Jones Industrial Average during the previous several sessions might prove to be premature. That resistance to selling in the NASDAQ Composite and the Value Line index might possibly be underscoring the true nature of the market. With that reflection further surfacing in the Most Actives Advance/Decline Line (MAAD), which demonstrated little weakness, let alone any negative divergence relative to pricing, as the Dow failed.

Then came last Thursday’s session that was preceded by a downdraft Wednesday night. At the end of trading Thursday the S&P was down 24.07 (-1.43%) with the already weak Dow 30 down 225.47 (-1.47%). COMPX lost 63.15 (-1.72%) and VAY was down 62.21 (-1.58%). What had changed was that all of the major indexes had turned negative on the Minor Cycle and the resistance to selling in COMPX and VAY had evaporated. True that the latter two still looked better on the charts, but sellers had proved that neither was immune.

Market Overview – What We Know:

  • Selling last week in all major indexes not only put all majors in synch on downside, but all also were last negative on Minor Cycle. Dow 30 remains weakest with NASDAQ Composite and Value Line index resisting selling the best.
  • Market volume rose 2.5% on week.
  • S&P 500 must rally above upper edge of 10-Day Price Channel (1700.21 through Monday) to turn newly negative Minor Cycle positive. Intermediate Cycle turns negative with S&P selling below lower edge of 10-Week Price Channel (1615.90 through August 23).
  • Our short-term volatility indicator (VBVI) that reached extreme negative level on August 7 has begun to recover, although indicator is not yet in buy zone
  • Daily MAAD declined last Friday and on week, but indicator continues to hold up well relative to pricing. MAAD has yet to decline below uptrend line begun last November and has created no negative divergences. Daily MAAD Ratio was last at .92 with Weekly Ratio at 1.13.
  • Daily CPFL declined below June 24 support point last week, was negative by 4.17 to 1, and remains below resistance high made June 11. Daily CPFL Ratio was last “Oversold” at .53, as was Weekly Ratio at .76.
  • Cumulative Volume (CV) remains weak relative to pricing in S&P 500 and Dow 30, and especially in S&P 500 Emini.

In a matter of several sessions, the complexion of the market assumed a bearish tone on at least the near term and some of the same bogey men that persisted in the rally initiated after the June 24 short-term lows (1560.33—S&P 500), surfaced again. Short-term Momentum that had failed to make new highs after peaking on June 11 in the S&P 500 simply headed lower and into negative territory with relative ease and was last stuck in negative territory. Underscoring the failure of short-term Momentum is the tendency of the indicator to peak about one-half way through a rally, which it did. In that respect the S&P intraday high for the move on August 2 (1709.67) was unsurprising.

Our VIX-based volatility indicator (VBVI) that reached its nadir on August 5 after working lower and lower (the indicator operates inversely to prices), as prices moved higher for the better part of a month, then reversed direction. While the indicator is not yet into a zone of opportunity, it has backed off from extremely negative levels, as the market has pulled back.

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