Market sells lower on week, but negativity is not inclusive

Weekly Review: MAAD & CPFL Analysis

 

Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1632.97

-30.53

-1.83%

Dow Jones Industrials

14810.31

-200.20

-1.33%

NASDAQ Composite

3589.87

-67.92

-1.85%

Value Line Arithmetic Index

3800.54

-97.08

-2.49%

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

When we wrote our Market Summary for the week ending August 30, we thought there was a glimmer of a hope in spite of recent negativity in the Dow Jones Industrial Average, and to somewhat lesser extent in the S&P 500. Going forward, we wondered if relatively less weakness in the NASDAQ Composite and Value Line indexes might offset selling in the Dow and the S&P. Our Most Actives Advance/Decline Line (MAAD) that includes composite data for the top volume equities on all exchanges underscored that notion.

Market Overview – What We Know:

  • All major indexes lost ground last week and all traded to new short-term lows. Dow 30 remains largest net loser since early August highs with bellwether also signaling new Intermediate Cycle negative last week via our Trading Oscillators.
  • While market volume increased 5.3%, rise in activity was relative to modest shrinkage previous week when NASDAQ was closed for nearly one half session and erroneous options trades at a major firm also resulted in less weekly market activity.
  • To turn short-term trend positive, S&P 500 must rally above upper edge of 10-Day Price Channel (1665.17 through Monday). Intermediate Cycle turns negative with S&P selling below lower edge of 10-Week Price Channel (1638.33.03 through September 6).
  • Our short-term volatility indicator (VBVI) was last at 13.6% compared to 22% at June 24 short-term low. Weekly VBVI remains positive.
  • Daily MAAD was negative by 7 to 13 last Friday and 0 to 20 on week. Via last Tuesday’s sharp downdraft in broad market, MAAD dipped marginally below uptrend line stretching back to November lows, but on relative basis was also only 19 positive issues from equaling August 14 new high. Daily MAAD Ratio was “Neutral” at .97 with Weekly MAAD marginally “Overbought” at 1.21.
  • CPFL declined to new short-term low last week and was last at uptrend line stretching back to October 2011 indicator lows. Indicator was negative on week by 4.45 to 1. Daily and Weekly CPFL Ratios were “Oversold” at .53 and .70, respectively.

But proving, yet again, that misery loves company, the bearish contingent was able to cajole the market lower last week. Last Tuesday the point was proven big time when all of the major indexes not only declined sharply to re-assert short-term negativity, but as the week wore on, all also traded to new short-term lows. Adding insult to injury, as in a love relationship gone badly, the Dow 30 on the heels of losses the previous week confirmed its unfavorable tone by turning negative on the Intermediate Cycle. In other words, the venerable blue chip that peaked back on August 2 (15658.43) on an intraday basis at its best level since March 2009 would have none of any suggestions the market might do better in the face of its near-term liquidation.

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