Market profit-taking sets in, but near-term trend still positive

MAAD & CPFL Review

 

Market Snapshot for session ending 09-12-13
 

Last

Day Change

%Change

S&P 500 Index

1683.42

-5.71

-.34%

Dow Jones Industrials

15300.64

-25.95

-.17%

NASDAQ Composite

3715.96

-9.04

-.24%

Value Line Index

3950.08

-22.83

-.57%

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

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:

  • Fractional red ink surfaced Thursday when all of major indexes backed off slightly
  • Market volume was off less than 1%. NYSE a/d data was negative by 2.37 to 1 with NYSE up/down volume also negative by 2.56 to 1.
  • S&P 500 must sell below lower edge of 10-Day Price Channel (1638.25 through Friday) to reverse short-term trend to negative. Intermediate Cycle, as measured by lower edge of 10-Week Price Channel (1649.34 through September 13) remains tentatively positive.
  • Our VIX-based short-term volatility indicator rose to 72% Thursday from Wednesday’s 68% level. Most recent VBVI statistical low was13.6% made on August 30. Into August 5 short-term high VBVI was at 98.3%.
  • Daily MAAD pulled back Thursday from new high reached Wednesday. Three issues were positive and 16 were negative. One was unchanged. Daily MAAD Ratio moved lower from an extremely “Overbought” level hit Wednesday (2.70), but was still overheated at 2.02.
  • Daily CPFL was negative by 1.43 to 1 Thursday and could make a new short-term low with only modestly more weakness. Indicator nonetheless remains near long-term uptrend line stretching back to October 2011 with Daily CPFL Ratio deeply “Oversold” at .63.

Market Overview – What We Think:

  • Net strength since recent short-term lows (1627.47—S&P 500) made August 28 has eliminated deeply “Oversold” Minor Cycle conditions. Moderately “Overbought” to “Overbought” conditions now prevail.
  • Of concern is extremely overheated Daily MAAD Ratio (2.02). While indicator could “self correct” going forward, given fact only COMPX has made new highs, negative divergence in terms of upside price follow through could be a problem in sessions just ahead. Thursday’s marginal selling may have been first suggestion of near-term vulnerability.
  • If market peaks out on near-term before new highs are made in all indexes, failures would not bode well for staying power of larger, and mature, Intermediate Cycle that has been underway since last November.
  • If so, we would not be able to rule out possibility strength since recent lows could prove to be merely “return action” rally into developing Intermediate Cycle high, new recent highs in COMPX and MAAD notwithstanding.
  • But for moment, so long as short-term trend remains intact, possibility remains further price improvement could follow and that MAAD may be more accurately reflecting Smart Money tendencies than other breadth-based indicators.

Index Price Channel Stops (10-Bar MAs of Highs/Lows ) Weekly Monthly
 

9/9

9/10

9/11

9/12

9/13

9/13

9/30

S&P 500 Index

SELL 1636.87

SELL 1635.63

SELL 1635.33

SELL 1638.05

SELL 1638.25

SELL 1649.34

SELL 1448.73

Dow Jones Industrials

SELL 14831.81

SELL 14814.37

SELL 14805.00

SELL 14821.72

SELL 14813.32

BUY 15497.13

SELL 13465.21

NASDAQ Composite

SELL 3597.65

SELL 3596.45

SELL 3596.56

SELL 3607.40

SELL 3609.22

SELL 3519.12

SELL 3044.23

Value Line Index

SELL 3831.74

SELL 3826.34

SELL 3828.97

SELL 3828.38

SELL 3828.30

SELL 3829.01

SELL 3180.51

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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