Stock market fades Wednesday, but short-term trend still a toss-up

MAAD & CPFL Review

 

Market Snapshot for session ending 10-02-13
 

Last

Day Change

%Change

S&P 500 Index

1693.87

-1.13

-.07%

Dow Jones Industrials

15133.14

-58.56

-.39%

NASDAQ Composite

3815.01

-2.96

-.08%

Value Line Index

4043.76

-9.32

-.23%

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:

  • More selling surfaced in major indexes Wednesday. Biggest loser was Dow 30 that was down .39%.
  • Market volume declined 4.6%.
  • Short-term trend remains unfavorable in S&P 500. For bellwether to take on more positive tone it must rally above upper edge of 10-Day Price Channel (1711.43 through Thursday). 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, continues to correct recent “Overbought” excesses in wake of recent short-term highs. Indicator was at 72.2% Wednesday, down from Tuesday’s 77.6%. Into September 19 short-term high VBVI was at 92.4%.
  • Daily MAAD was positive Wednesday with 14 issues higher and 6 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 is “Oversold” at .80.
  • Daily CPFL dipped to slightly lower new short-term low Wednesday on negative ratio of 1.11 to 1. Plot is 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 is “Oversold” at .58.

Market Overview – What We Think:

  • Resumption of selling Wednesday in major indexes not only strengthened negativity in S&P 500 and Dow 30, it erased part of gains that resulted in new highs in COMPX, VALUA, and Russell 2000 Tuesday.
  • Despite negative undertone, however, Daily MAAD was net gainer with indicator remaining in uptrend above trend line stretching back to November 2012. Latest Daily MAAD plot was just 22 net positive issues from equaling September 18 new high. So long as MAAD remains favorable, we cannot preclude possibility market will perform better than not. But indicator must make new highs to suggest positive, overall market action.
  • But ongoing weakness in CPFL is a troublesome contradiction and is a niggling suggestion 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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