Market bounces a bit, but short-term still in jeopardy

MAAD & CPFL Review

 

Market Snapshot for session ending 09-26-13
 

Last

Day Change

%Change

S&P 500 Index

1698.67

+5.90

+.35%

Dow Jones Industrials

15328.30

+55.04

+.36%

NASDAQ Composite

3787.42

+26.32

+.70%

Value Line Index

4036.62

+16.43

+.41%

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

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:

  • More selling surfaced in major indexes Wednesday with biggest loser in Dow 30. Lesser than blue chips performed best, but all indexes remain challenged on Minor Cycle.
  • Market volume rose just over 1%.
  • To turn short-term trend negative, S&P must sell below lower edge of 10-Day Price Channel (1693.17 through Thursday). Intermediate Cycle, as measured by lower edge of 10-Week Price Channel (1654.26 through September 27), remains tentatively positive.
  • Our VIX-based short-term volatility indicator, VBVI, eased fractionally to 88.2% from Tuesday’s 88.3% to suggest some abatement in selling. Most recent VBVI statistical low was13.6% made on August 30. Into August 5 short-term high VBVI was at 98.3%.
  • Daily MAAD was flat Wednesday with 10 issues higher and 10 lower. Indicator remains above uptrend line stretching back to last November’s lows and continues to correct recent “Overbought” conditions on short term. Daily MAAD Ratio was last near “Neutral” at 1.05.
  • Daily CPFL was negative by 3.74 to 1 Tuesday, as indicator dropped to another new short to intermediate-term low. Plot was lowest level since March 14 when S&P 500 was quoted near 1560. Indicator is now below long-term uptrend line stretching back to October 2011. CPFL Daily Ratio was last in the upper reaches of “Oversold” territory at .87.

Market Overview – What We Think:

  • Weakness in all of major indexes over past several days has finally resulted in break by Dow 30 below lower edge of 10-Day Price Channel to suggest reversal of recent Minor Cycle positive. S&P is close on heels of Dow while COMPX and Value Line look marginally better.
  • Dow was weaker than other indexes out of gate on recent short-term advance, however. And considering fact Daily MAAD Ratio has rapidly returned to “Neutral” levels, its possible market could experience bounce from current levels. VBVI underscores that possibility. If not, considering fact CPFL has dipped to new short to intermediate-term low, time may be running out on near-term advance begun at end of August.
  • CPFL weakness suggests options crowd has continued to view recent market strength with skepticism and has been buying more puts on Dollar Value basis than calls. Negative tone of options buying could weigh on market.
  • But until there is confirmed reversal of new short-term negative with inclusive selling below lower edges of 10-Day Price Channels in all indexes, we cannot preclude possibility recent downdraft could prove to be nothing but a lull in Minor Cycle positive within context of still positive intermediate and long-term cycles.

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

9/23

9/24

9/25

9/26

9/27

9/27

9/30

S&P 500 Index

SELL 1673.16

SELL 1679.47

SELL 1685.08

SELL 1693.17

SELL 1697.97

SELL 1654.26

SELL 1448.73

Dow Jones Industrials

SELL 15156.30

SELL 15239.51

SELL 15303.52

SELL 15383.57

SELL 15418.60

SELL 15160.93

SELL 13465.21

NASDAQ Composite

SELL 3690.85

SELL 3700.73

SELL 3710.68

SELL 3726.33

SELL 3738.26

SELL 3561.72

SELL 3044.23

Value Line Index

SELL 3921.72

SELL 3937.46

SELL 3951.51

SELL 3972.26

SELL 3986.37

SELL 3847.32

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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