Oversold market rallies Thursday amid Nasdaq close

MAAD & CPFL Review

 

Market Snapshot for session ending 8-22-13
 

Last

Day Change

%Change

S&P 500 Index

1656.96

+14.16

+.86%

Dow Jones Industrials

14963.74

+66.19

+.44%

NASDAQ Composite

3638.70

+38.91

+1.08%

Value Line Arithmetic Index

3890.30

+46.20

+1.20%

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:

  • Despite shut down of NASDAQ from about noon to 3:30 pm for technical reasons, major indexes were nonetheless able to post modest gains Thursday. NYSE advances/declines were positive by 5.03 to 1 and NYSE up/down volume was ahead by 5.55 to 1
  • Market volume, due to NASDAQ issue, declined nearly 29% Thursday
  • S&P 500 must rally above upper edge of 10-Day Price Channel (1688.14 through Friday) 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 45%.
  • Daily MAAD was positive Thursday by 17 to 3 and continues to outperform broad market. Indicator could make new high with 21 net positive issues. On flip side, uptrend put in place after last November lows is within range for MAAD on downside. Daily MAAD Ratio was “Neutral” at .92.
  • Daily CPFL was positive by 8.7 to 1 Thursday and moved upward from new short-term low hit Wednesday. Most recent high was made June 24. Indicator remains below uptrend line stretching back to November lows. Daily CPFL Ratio was “Oversold” at .71.

Market Overview – What We Think:

  • In retrospect it would be interesting to discover Thursday’s lows, despite closure of NASDAQ, was bottom of Minor Cycle decline initiated after August 2 S&P 500 high (1709.67).
  • Fact that COMPX and VAY have recently resisted selling pressures while Daily MAAD did not participate in the May/June decline and then quickly dipped to “Neutral/Oversold” levels along with CPFL makes recent decline somewhat suspicious from bullish point-of-view.
  • Short-term “Oversold” numbers based on price are also evident in major indexes, but all such readings must be viewed in context that often reflects negative “Oversold” conditions early in larger 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.
  • Nonetheless, we wonder if all of the buying has been wrung out of uptrend initiated last November.

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

BUY1700.21

BUY1699.44

BUY1698.36

BUY1694.45

BUY1688.14

SELL1615.90

SELL1422.19

Dow Jones Industrials

BUY15553.21

BUY15539.10

BUY15517.22

BUY15476.75

BUY15406.99

SELL14984.69

SELL13195.39

NASDAQ Composite

BUY3676.69

BUY3680.14

BUY3681.63

BUY3671.58

BUY3661.51

SELL3427.01

SELL3007.61

Value Line Index

BUY3963.88

BUY3962.99

BUY3960.41

BUY3954.79

BUY3940.68

SELL3702.50

SELL3107.83

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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