S&P 500 surges since Tuesday, but volume down for second day

MAAD & CPFL Review

 

Market Snapshot for session ending 8-29-13
 

Last

Day Change

%Change

S&P 500 Index

1638.17

+3.21

+.20%

Dow Jones Industrials

14840.95

+16.44

+.11%

NASDAQ Composite

3620.30

+26.95

+.75%

Value Line Arithmetic Index

3844.61

+23.23

+.61%

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

Intermediate Cycle* (Medium trend lasting weeks to several months) 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 posted small gains Thursday. Biggest gainer, Value Line index, was up .61%. NYSE advances/declines were positive by 1.78 to 1 and NYSE up/down volume was ahead by 1.71 to 1. Short-term trend remains negative.
  • Market volume shrank for second day in row and was down 5.9%.
  • S&P 500 must rally above upper edge of 10-Day Price Channel (1665.75 through Friday) to turn Minor Cycle positive. Intermediate Cycle remains positive until S&P sells below lower edge of 10-Week Price Channel (1627.03 through August 30).
  • Our VIX-based short-term volatility indicator continues to correct Minor Cycle excesses accrued from June 24 lows (22%) through early August highs (98.3%). Indicator was last at 24%.
  • Daily MAAD was positive Thursday by 15 to 4. After threatening intermediate-term uptrend in effect since last November on Tuesday, Daily MAAD has recovered and could equal August 14 new high with only 13 positive issues. Daily MAAD Ratio was near “Neutral” at .95.
  • Daily CPFL was negative by 9.1 to 1 Thursday and for fifth session in row. Indicator also declined to new short-term low. Most recent high was made June 24. Indicator remains below uptrend line stretching back to November lows and just above long-term trend begun in October 2011. Daily CPFL Ratio was “Oversold” at .52.

Market Overview – What We Think:

  • Two days of marginal recovery have allowed S&P 500 to reclaim 30% of losses suffered Tuesday, but strength was staged on declining volume to suggest price improvement over past two days is suspicious.
  • While short-term price-based oscillators are “Oversold” along with CPFL and to lesser extent MAAD at “Neutral,” still negative short-term trend nonetheless leaves market in tentative position. Also, “Oversold” conditions can persist early in larger cycle trend reversal and could merely be reflection of new larger cycle negative.
  • In other words, if short-term “Oversold” conditions do not “bite” to extent they spur more buying, more selling could simply extend near-term losses while putting larger Intermediate Cycle in jeopardy. Odds are even months-long intermediate-term advance may be in end game.
  • In background there is lingering potential for 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
 

8/26

8/27

8/28

8/29

8/30

8/30

8/31

S&P 500 Index

BUY 1681.87

BUY 1676.45

BUY 1671.54

BUY 1667.79

BUY 1665.75

SELL 1627.03

SELL 1422.19

Dow Jones Industrials

BUY 15340.58

BUY 15278.43

BUY 15215.94

BUY 15156.92

BUY 15114.85

SELL 15062.62

SELL 13195.39

NASDAQ Composite

BUY 3653.04

BUY 3646.18

BUY 3641.40

BUY 3638.86

BUY 3640.89

SELL 3455.72

SELL 3007.61

Value Line Index

BUY 3928.38

BUY 3916.77

BUY 3906.77

BUY 3900.98

BUY 3897.76

SELL 3740.46

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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