Key technical indicator tapping new highs; S&P, Dow close behind

MAAD & CPFL Review

 

Market Snapshot for session ending 09-17-13
 

Last

Day Change

%Change

S&P 500 Index

1704.76

+7.16

+.42%

Dow Jones Industrials

15529.73

+34.94

+.23%

NASDAQ Composite

3745.69

+27.85

+.75%

Value Line Index

4007.23

+28.73

+.72%

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

Intermediate Cycle* (Medium trend lasting weeks to several months) Neutral / Positive

Major Cycle* (Long-term trend lasting several months to years) Positive

* Cycle status is based on S&P 500.

Market Overview – What We Know:

  • More buying Tuesday pushed all of major indexes into plus column. S&P 500, NASDAQ Composite, and Russell 2000 futures contracts all hit new highs along with cash NASDAQ, Value Line index, and Russell 2000. Cash S&P 500 and Dow 30, and Dow Emini have yet to make new highs, but all were close.
  • Market volume declined 7.1%. NYSE a/d data was positive by 1.99 to 1. NYSE up/down volume was positive by 2.56 to 1.
  • Short-term trend remains positive and S&P must sell below lower edge of 10-Day Price Channel (1654.68 through Wednesday) to signal short-term reversal to negative. Intermediate Cycle, as measured by lower edge of 10-Week Price Channel (1653.49 through September 20), remains tentatively positive.
  • Our VIX-based short-term volatility indicator rose to 88% Tuesday from Monday’s 83%. Most recent VBVI statistical low was13.6% made on August 30. Into August 5 short-term high VBVI was at 98.3%.
  • Daily MAAD rallied to another new high Tuesday by 17 to 3. Level is best since March 2009. Daily MAAD Ratio was “Overbought” at 2.36.
  • Daily CPFL inched higher Tuesday from new short to intermediate-term low made Monday. Indicator was positive by 1.77 1o 1. Monday’s low was worst since March 14, 2013. Indicator remains just below long-term uptrend line stretching back to October 2011. Daily CPFL Ratio was still “Oversold” at .86, but was working higher toward “Neutral.”

Market Overview – What We Think:

  • More buying Tuesday underscored positive direction of MAAD that has been making new highs since September 4 to suggest Smart Money continues to like this market. What remains to be seen is if all of major indexes will confirm MAAD’s positive tone since S&P 500 and Dow, while close, are lagging. No such doubt is evident in NASDAQ Composite, Value Line index, or Russell 2000, all of which have made new highs via cash and futures.
  • What does concern us though is developing “Overbought” readings on near-term from number of sources including price-based oscillators, MAAD Daily Ratio, and our volatility indicator (VBVI). And then there is the very poor showing from CPFL that seems to be operating in some other dimension with little call buying evident.
  • If Minor Cycle top develops without S&P 500 and Dow 30 closing at new highs, then price action thereafter could become problematic on larger and positive Intermediate Cycle that has just entered its 10th month. At that point, ongoing bullish status of MAAD would become an increasing puzzle unless weakness occurred below MAAD uptrend in effect since last November. Then, even without negative price divergence to hint at impending top, there would be little hope for continuation of intermediate uptrend.
  • But for moment, so long as short-term trend remains intact based on pricing, possibility remains further gains could follow and that MAAD may be more accurately reflecting Smart Money tendencies than other breadth-based indicators like traditional NYSE a/d line (NYAD) that has not made new high since May 21.

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

9/16

9/17

9/18

9/19

9/20

9/20

9/30

S&P 500 Index

SELL 1641.48

SELL 1647.85

SELL 1654.68

SELL 1661.21

SELL 1666.79

SELL 1653.49

SELL 1448.73

Dow Jones Industrials

SELL 14831.98

SELL 14876.16

SELL 14941.21

SELL 15014.66

SELL 15083.99

BUY 15513.08

SELL 13465.21

NASDAQ Composite

SELL 3621.20

SELL 3640.12

SELL 3655.66

SELL 3670.43

SELL 3680.72

SELL 3543.30

SELL 3044.23

Value Line Index

SELL 3836.20

SELL 3853.38

SELL 3873.84

SELL 3891.25

SELL 3905.74

SELL 3839.05

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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