Secondary indexes make new highs as S&P, Dow lag

MAAD & CPFL Review

 

Market Snapshot for session ending 10-01-13
 

Last

Day Change

%Change

S&P 500 Index

1695.00

+13.45

+.80%

Dow Jones Industrials

15191.70

+62.03

+.41%

NASDAQ Composite

3817.98

+46.50

+1.23%

Value Line Index

4053.22

+41.86

+1.04%

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

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:

  • Buying Tuesday pushed prices in major index higher. NASDAQ Composite, Value Line index, and Russell 2000 closed at new highs and best levels since March 2009. S&P 500 and Dow 30 continue to lag.
  • Market volume declined 6.5%.
  • To take on more positive tone, S&P 500 must rally above upper edge of 10-Day Price Channel (1712.45 through Wednesday). Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1652.28 through October 4).
  • Our VIX-based short-term volatility indicator, VBVI, was at 77.6% Tuesday as compared to Monday’s level at 78.5%. Into September 19 short-term high VBVI was at 92.4%.
  • Daily MAAD was positive Tuesday with 17 issues higher and 3 lower. Indicator’s most recent high, and best level since March 2009, was made September 19. MAAD remains above uptrend line stretching back to last November’s lows. Daily MAAD Ratio was last slightly “Oversold” at .90.
  • Daily CPFL sank to another short-term low Tuesday via negative readings of 2.31 to 1. Plot was lowest since last February when S&P 500 was quoted near 1500. 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 .63.

Market Overview – What We Think:

  • Marginal recovery in S&P 500 and Dow 30 Tuesday with strength to new highs in COMPX, VALUA, and Russell 2000 puts short-term trend back in limbo while setting up same sort of divergence that persisted prior to last short-term advance when secondary issues lead on upside to new highs along with MAAD.
  • This time around, however, Daily MAAD has yet to make new high with market while remaining below its September 18 peak. MAAD appears to be in synch with lagging S&P and Dow that have yet to prove they too can make new highs. If not and MAAD holds below recent highs, negative divergence we have been looking for could be underway if COMPX, VALUA, and Russell 2000 move higher.
  • Ongoing CPFL weakness suggests options crowd still views market with skepticism and has been buying more puts on Dollar Value basis than calls since indicator peaked June 11. That negativity created first negative divergence in CPFL vs. S&P since last November

 

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

9/30

10/1

10/2

10/3

10/4

10/4

10/31

S&P 500 Index

BUY 1713.30

BUY 1713.63

BUY 1712.45

BUY 1711.43

BUY 1708.65

SELL 1652.28

SELL 1478.59

Dow Jones Industrials

BUY 15556.03

BUY 15546.22

BUY 15520.87

BUY 15497.37

BUY 15460.42

SELL 15102.50

SELL 13737.33

NASDAQ Composite

SELL 3742.16

SELL 3746.14

SELL 3749.80

SELL 3755.79

SELL 3758.85

SELL 3573.66

SELL 3099.00

Value Line Index

SELL 3991.63

SELL 3995.99

SELL 4001.49

SELL 4007.23

SELL 4009.64

SELL 3847.67

SELL 3285.29

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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