Stock market hesitates amid oversold near-term conditions

MAAD & CPFL Review

 

Market Snapshot for session ending 8-20-13
 

Last

Day Change

%Change

S&P 500 Index

1652.35

+6.29

+.38%

Dow Jones Industrials

15002.99

-7.75

-.05%

NASDAQ Composite

3613.59

+24.50

+.68%

Value Line Arithmetic Index

3871.45

+43.19

+1.13%

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.

Market Overview – What We Know:

  • Major indexes, including S&P 500, NASDAQ Composite, and Value Line index recovered somewhat Tuesday, but Dow Jones 30 remained weak with small loss.
  • Market volume rose 5%. NYSE advance/decline data was positive by 3.34 to 1 with NYSE up/down volume positive by 2.95 to 1.
  • S&P 500 must rally above upper edge of 10-Day Price Channel (1698.36 through Wednesday) to turn Minor Cycle positive. Intermediate Cycle remains positive until S&P sells below lower edge of 10-Week Price Channel (1516.90 through August 23).
  • Our VIX-based short-term volatility indicator continues to correct short-term excesses accrued since June 24 Minor Cycle lows when indicator was last in buying zone. Since August 2 S&P intraday and short-term high (1709.67), indicator has retraced about 50% of negative tone.
  • Daily MAAD was positive Tuesday by 15 to 4. Indicator remains only 19 issues from making new high relative to August 14 peak and best level since March 2009. MAAD continues to outperform S&P and Dow 30, but may be reflecting relative strength in COMPX and VAY. Daily MAAD Ratio was last “Neutral” at 1.00.
  • Daily CPFL was negative by 1.27 to 1 Tuesday and traded down to new short-term low. Indicator is below short-term support low created June 24. Most recent high was made June 24. Indicator remains below uptrend line stretching back to November lows. Daily CPFL Ratio was “Oversold” at .47.

Market Overview – What We Think:

  • Tuesday’s rebounding action in three of four major indexes left short-term trend in limbo.
  • Short-term “Oversold” numbers based on price are now evident in major indexes, as are “Oversold” conditions in Daily MAAD and CPFL.
  • Either those numbers are reflecting new negativity in front of what could be reversal of intermediate uptrend to negative, or they are preliminary to short-term low that would leave Intermediate Cycle intact.
  • Fact Daily MAAD not only remains above uptrend line stretching back to November 16, but indicator is also only 19 issues from making new highs suggests MAAD is more bullish than market seems.
  • If MAAD continues to resist selling pressures on Minor Cycle, Intermediate Cycle might still have some life left in it.
  • But 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
 

8/19

8/20

8/21

8/22

8/23

8/23

8/31

S&P 500 Index

BUY 1700.21

BUY 1699.44

BUY 1698.36

BUY 1694.45

BUY 1688.14

SELL 1615.90

SELL 1422.19

Dow Jones Industrials

BUY 15553.21

BUY 15539.10

BUY 15517.22

BUY 15476.75

BUY 15406.99

SELL 14984.69

SELL 13195.39

NASDAQ Composite

BUY 3676.69

BUY 3680.14

BUY 3681.63

BUY 3671.58

BUY 3661.51

SELL 3427.01

SELL 3007.61

Value Line Index

BUY 3963.88

BUY 3962.99

BUY 3960.41

BUY 3954.79

BUY 3940.68

SELL 3702.50

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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