S&P, Dow abate selling, as secondary stock indexes sink further

MAAD & CPFL Review

 

Market Snapshot for session ending 10-09-13
 

Last

Day Change

%Change

S&P 500 Index

1656.40

+.95

+.06%

Dow Jones Industrials

14802.98

+26.44

+.18%

NASDAQ Composite

3677.77

-17.05

-.46%

Value Line Index

3926.90

-4.84

-.11%

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:

  • While bluer chip S&P 500 and Dow 30 took a breather from recent selling Wednesday and rallied slightly, lesser quality issues in NASDAQ Composite and Value Line indexes sold down to new short-term lows.
  • Market volume was higher by 5.1%.
  • S&P 500 remains negative on Minor Cycle and needs to rally above upper edge of 10-Day Price Channel (1696.76 through Thursday). Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1650.48 through October 11).
  • Market volatility as measured by our VIX-based short-term volatility indicator, VBVI, was only slightly lower Wednesday (26.2%) compared to Tuesday’s level (26.4%) to suggest some lessening in downside selling pressures. Into September 19 short-term high VBVI was at 92.4%.
  • Daily MAAD was slightly higher Wednesday with 11 issues positive and 9 negative. Indicator remains above uptrend line stretching back to November 2012 lows and continues to perform slightly better than S&P 500. Best Daily MAAD level since March 2009 was made September 19. Daily MAAD Ratio remains near “Neutral” (.87).
  • Daily CPFL declined to new short to intermediate low Wednesday and worst level 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 .73.

Market Overview – What We Think:

  • While it was apparently time for some catch-up selling in secondaries Wednesday, as S&P and Dow recovered slightly, short-term stats are suggesting some broader rebounding could soon develop. Minor Cycle stats are back into “Oversold” territory. This is evident in price-based data and our VIX-based volatility indicator, VBVI.
  • If such a bounce does not occur, there could be bigger problems of larger Intermediate Cycle that has already slipped into negative zone with Dow 30. S&P is not far behind. And if it’s a matter of follow the leader, as has been case with COMPX and VALUA over past few sessions, odds would then favor negativity on intermediate-term in all indexes.
  • Adding to Dow problems, Cumulative Volume (CV) in bellwether has declined below key supports to levels not seen since Dow was at 13900 last February. Reason weakness is interesting is because CPFL, heading lower since June 11, is also back to levels not seen since last February.
  • Daily MAAD continues to look a bit better relative to pricing, but it remains to be seen if MAAD is exercising some prescience to contradict too much recent bearishness or if indicator will falter to suggest it is out of step with larger forces and Smart Money overplayed its hand this time around.
  • There is also a bottom-line for this market – nothing but new highs will re-assert the bull trend begun in March 2009. And right now that scenario is a bit frayed.

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

10/7

10/8

10/9

10/10

10/11

10/11

10/31

S&P 500 Index

BUY 1704.24

BUY 1701.84

BUY 1699.11

BUY 1696.76

BUY 1695.01

SELL 1650.48

SELL 1478.59

Dow Jones Industrials

BUY 15412.33

BUY 15362.17

BUY 15313.63

BUY 15264.59

BUY 15218.03

BUY 15317.66

SELL 13737.33

NASDAQ Composite

SELL 3755.73

SELL 3759.38

BUY 3798.66

BUY 3802.49

BUY 3805.23

SELL 3584.77

SELL 3099.00

Value Line Index

SELL 4004.81

BUY 4041.91

BUY 4043.33

BUY 4043.16

BUY 4041.88

SELL 3844.18

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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