Market eases Thursday, but minor cycle still positive

MAAD & CPFL Review

 

Market Snapshot for session ending 09-19-13
 

Last

Day Change

%Change

S&P 500 Index

1722.34

-3.18

-.18%

Dow Jones Industrials

15636.55

-40.39

-.26%

NASDAQ Composite

3789.38

+5.74

+.15%

Value Line Index

4049.28

-2.56

-.06%

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

Intermediate Cycle* (Medium trend lasting weeks to several months) 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:

  • Major indexes, excepting Dow 30, rallied to new highs Thursday before prices were forced lower by profit taking. Only NASDAQ Composite closed at new high.
  • Market volume declined 7.4%.
  • To turn short-term trend negative, S&P must sell below lower edge of 10-Day Price Channel (1666.79 through Friday) to signal 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 92% Thursday from Wednesday’s 91%. 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 slightly from new highs reached Wednesday. Nine issues were higher and 11 were lower. Daily MAAD Ratio was “Overbought” at 2.00.
  • Daily CPFL was positive Wednesday by 1.54 to 1, but was only slightly above new short to intermediate low made Monday at lowest level since March 14, 2013. Indicator remains just below long-term uptrend line stretching back to October 2011. Daily CPFL Ratio was last “Neutral” at 1.07.

Market Overview – What We Think:

  • Profit-taking Thursday, on heels of sharp gains Wednesday, was not enough to reverse, as yet, short-term advance that has been a confirmation of recent positive direction of MAAD. Indicator has been making new highs since September 4 to suggest Smart Money continues to like this market.
  • What is becoming increasing concern is developing “Overbought” readings on near-term. Number of sources including price-based oscillators, MAAD Daily Ratio, and our volatility indicator (VBVI) are overheated on Minor Cycle. And then there is the very poor showing from CPFL that seems to be operating in some other dimension with little call buying evident.
  • What is encouraging about new highs, however, is fact that with all of major indexes and index proxies at new highs, larger Intermediate and Major Cycles have been re-confirmed on upside to underscore bull trend.
  • So long as short-term trend remains intact, possibility remains further gains 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
 

9/16

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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