There is also a big problem with our Call/Put Dollar Value Flow Line (CPFL) that peaked back on June 11 and which has failed to confirm any market strength since then. And while CPFL has remained “Oversold” and in an apparent zone of “opportunity” for the past few weeks, it also dipped below a nearly two-year-old long-term uptrend the first week of September. Weakness in CPFL for the first time since October 2011, despite higher index pricing, runs a parallel with another period in market history. The last time CPFL failed so noticeably was prior to the 2007 highs. After months of CPFL failing to confirm price strength to new highs, the CPFL Weekly Ratio dipped into negative territory (below 1.00) the week ending July 27, 2007. The Ratio remained negative until late March 2008 and just before the onset of a brief upside reaction in the early stages of the 2008-2009 bear market. Put another way, if the CPFL Ratio does not move back into positive territory relatively soon, its negative shadow hang over the market.
Another indicator we have referred to often recently is our VIX-based Volatility Indicator that has returned to a level of short-term vulnerability not seen since the August highs. VBVI was at 91.4% last Friday, down slightly from the previous day’s reading at 92.45, but still in a zone that has coincided historically with a short-term top. Even though the previous high in the indicator occurred August 5 at 98.3% and coincident with the high of the most recent near-term high, the difference between the current reading and the August level is minimal.
Daily S & P 500 with Cumulative Volume (CV)
Weekly S & P 500 with Cumulative Volume (CV)
On the Cumulative Volume front, CV kept pace with pricing in the S&P 500 from the November intermediate-term lows relatively well until the late May short-term highs. Thereafter CV was marginally weaker into the June lows than the index. It was weaker again into the August highs and then was only able to eke out a slightly higher high into the most recent rally. And that movement by cash doesn’t come anywhere near describing the poor performance of CV in the S&P 500 Emini futures contract that peaked on the Intermediate Cycle the week ending May 21, cratered into the June lows and hit levels equal to S&P pricing not seen since last December. And that demonstrated nothing but a feeble response into the August highs and most recently. Similar action was evident in COMPX and DJ futures.