Market Overview – What We Think:
- With net negativity last week and all major indexes trading down to new short-term lows, vestiges of near-term price optimism were temporarily muted.
- Although short-term looks “Oversold,” such readings early in trend reversal can prove to be more a reflection of new negative trend than of a short-term buying opportunity, IF larger Intermediate Cycle is also about to turn negative.
- In other words, status of larger Intermediate Cycle that has been underway since lows were made last November 16 remains in limbo. While that trend is mature by any measurement, apparent disregard of its age by some indicators could be suggestion that distance traveled might ultimately prove to be bigger issue than its age.
- Clearly, how pricing plays out relative to defined 10-Day and 10-Week Price Channels will determine whether or not positive flavor of some indicators is prescient, premature, or simply in error.
- 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.
In addition, market breadth indicators like the NYSE advance/Decline Line (NYAD), NYSE Up/Down Volume (NYUD), and our Call/Put Dollar Value Flow Line (CPFL) were also not inclined to view the market positively, despite pockets of optimism elsewhere. Interestingly, while all three indicators confirmed none of the strength into the August highs, as selling continued last week only NYUD and CPFL sank to new short-term lows while NYAD did not. Short-term Momentum also did not make a new near-term low. In other words, NYAD and Momentum were signaling a note of optimism that MAAD suggested into and just after the August highs. One might say, “Some of the news was bad news, but not all of the news was bad.”
Daily S & P 500 with Cumulative Volume (CV)
Weekly S & P 500 with Cumulative Volume (CV)