Stock market's split personality persists

Weekly Review: MAAD & CPFL Analysis


Market Snapshot:


Week Chg

Week %Chg

S&P 500 Index




Dow Jones Industrials




NASDAQ Composite




Value Line Arithmetic Index




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

The two-tiered stock market, at least as measured by recent blue chip action in the S&P 500 and Dow 30 relative to the less blue NASDAQ Composite, Value Line index, and Russell 2000 shares, continued last week. While the S&P and Dow posted net losses and even dipped to new short-term lows, COMPX, VALUSA, and TFY perked to new highs mid-week and were net positive over the five-day period.

On the indicator front, our Daily Most Actives Advance/Decline Line (MAAD), while backing off from its September 18 short to intermediate-term high, was last only 22 positive issues from equaling its mid-September peak At the same time, Daily MAAD remains above an uptrend line stretching back to November 2012 and Weekly MAAD last week equaled a new high made the week of September 20. In a word, MAAD continues to confirm the positive action that has occurred in the lesser blues over the past several weeks while continuing to suggest there is still hope for the bullish point-of-view so long as the indicator does not initiate any negative divergences in the face of higher prices, and so long as it remains in the uptrend that is now nearly a year old.

Market Overview – What We Know:

  • Major indexes closed mixed last week with bluer chip S&P 500 and Dow 30 negative with lesser blue NASDAQ Composite, Value Line index, and Russell 2000 all net positive after reaching new highs during week.
  • Overall Market volume rose 4%.
  • Short-term trend in S&P 500 remains negative. For bellwether to take on more positive tone it must rally above upper edge of 10-Day Price Channel (1704.24 through Monday). Intermediate Cycle remains positive until lower edge of 10-Week Price Channel (1650.48 through October 11) is breached.
  • Our short-term volatility indicator (VBVI) was last toward “Neutral” (50%) after correcting “Overbought” excesses that developed into mid-September short-term highs. Weekly VBVI remains positive, but vulnerable, at 99%.
  • Daily MAAD hit new short-term low last Monday, but recovered slightly over remainder of week, despite new short-term lows in S&P and Dow 30. Indicator remains above longer-term uptrend line stretching back to November 2012 intermediate-term lows. On week, 10 issues were positive, 8 negative, and 2 unchanged. Weekly MAAD equaled new high reached week of September 20. Daily MAAD Ratio was near “Neutral” at .96 with Weekly Ratio marginally overheated at 1.44.
  • Daily CPFL sank to new short to intermediate-term low last Thursday. Despite Oversold conditions in both Daily and Weekly CPFL Ratios (.72 and .44, respectively), indicator remains below uptrend line begun October 2011. That line was penetrated on downside during first week of September to underscore disenchantment with market by options players.

What we’re also seeing in addition to the easier to spot market clues are short-term readings ranging from “Neutral” (Momentum and VBVI, our VIX-based volatility indicator) to “Oversold” (Daily MAAD and some price-based Trading Oscillators). VBVI in particular has corrected recent “Overbought” conditions back to “Neutral” levels. That same neutrality coincided with two of the six short-term lows (February and April 2013) that developed in the intermediate-term advance underway since last November. We’re wondering if current action could be the third such event since Weekly VBVI remains positive, as has been the case since early July.

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