S&P, Dow negative Thursday, while minor indexes hold ground

MAAD & CPFL Review

 

Market Snapshot for session ending 10-03-13
 

Last

Day Change

%Change

S&P 500 Index

1678.66

-15.21

-.90%

Dow Jones Industrials

14996.48

-136.65

-.90%

NASDAQ Composite

3774.34

-40.67

-1.07%

Value Line Index

4003.11

-40.52

-1.00%

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

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:

  • Short-term negative gained more legs on downside Thursday when all of major indexes moved lower. S&P 500 and Dow 30 hit new short-term lows. While NASDAQ Composite, Value Line Index, and Russell 2000 were also weaker, none of those issues has yet hit new short-term low, let alone sink below lower edges of 10-Day Price Channels to levels suggesting new Minor Cycle negative.
  • Market volume rose 5%.
  • To indicate short-term reversal to positive, S&P 500 must rally above upper edge of 10-Day Price Channel (1708.65 through Friday). 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 63.0% Thursday, down from Wednesday’s 77.2%. Into September 19 short-term high VBVI was at 92.4%.
  • Daily MAAD was negative Thursday with 2 issues higher and 18 lower. Indicator did not make new short-term low to confirm S&P and Dow 30 weakness. 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 .69.
  • Another new short to intermediate-term low was registered Daily CPFL Thursday on negative ratio of 1.17 to 1. Plot is lowest since last February when S&P 500 was quoted near 1490. Indicator is below long-term uptrend line stretching back to October 2011. CPFL Daily Ratio is “Oversold” at .58.

Market Overview – What We Think:

  • More selling Thursday in major indexes underscored negativity in S&P 500 and Dow 30. While COMPX, VALUA, and Russell 2000 were also lower, failure of last three to demonstrate weakness to same extent as bluer chips is a contradiction and is a carrot still for bullish crowd that has been pursuing secondary issues with enthusiasm since August lows and with little net selling since mid-September minor highs. It remains to be seen how prescient they will be.
  • Daily MAAD, while weaker Thursday, remains in uptrend line since November 2012 and, on relative terms, continues to reflect positive tone of issues extracted from COMPX that continue to appear in Top 20 Most Actives. In other words, it wouldn’t take much net buying, despite recent MAAD fade, to push indicator to new highs. That being said, it is also true MAAD MUST make new highs for this market to maintain its positive tone.
  • But ongoing weakness in CPFL is troublesome contradiction and is a niggling suggestion one sector of market, options players do not hold same positive view of market as do other players enamored of lesser quality COMPX, VALUA, and TFY.

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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