Stock selling Wednesday erases more bullish hints

MAAD & CPFL Review

 

Market Snapshot for session ending 8-21-13
 

Last

Day Change

%Change

S&P 500 Index

1642.80

-9.55

-.58%

Dow Jones Industrials

14897.55

-105.44

-.70%

NASDAQ Composite

3599.78

-13.80

-.38%

Value Line Arithmetic Index

3844.09

-27.36

-.71%

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:

  • Resumption of selling in major indexes Wednesday extended near term losses. NYSE advances/declines were negative by 2.69 to 1 and NYSE up/down volume was negative by 4.31 to 1. Nonetheless, NASDAQ Composite and Value Line index have resisted selling pressures to greater extent than have S&P 500 and Dow 30.
  • Market volume rose 9.4%.
  • S&P 500 must rally above upper edge of 10-Day Price Channel (1694.45 through Thursday) 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 two-thirds of negative tone. Short-term buy would be suggested when indicator gets into 15% to 20% range. It was last at 46%.
  • Daily MAAD was negative Wednesday by 9 to 1 (2 up and 18 down). MAAD continues to outperform S&P and Dow 30, but was last closing in on uptrend line stretching back to November lows. Daily MAAD Ratio was “Neutral” at .92.
  • Daily CPFL was negative by 6.7 to 1 Wednesday 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 .42.

Market Overview – What We Think:

  • More concerted selling Wednesday erased some of potential bullishness reflected in price-based “Oversold” conditions and some indicators such as Daily MAAD that have resisted market weakness, and which, like CPFL, are also “Oversold.”
  • Fact that some indexes such as COMPX and VAY have resisted selling pressures is proving to be simply a function of market supply and demand factors that, this cycle around, have been more favorable to secondaries than bluer chip issues.
  • Short-term “Oversold” numbers based on price are now evident in major indexes, as are “Oversold” conditions in Daily MAAD and CPFL, but those readings must be viewed in context that often reflects negative “Oversold” conditions early in cycle change. That could be the case this time around and is not necessarily a reflection of a short-term buying “opportunity.”
  • In background there is lingering 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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