Market spikes higher; short-term is better but still negative

MAAD & CPFL Review

 

Market Snapshot for session ending 10-10-13
 

Last

Day Change

%Change

S&P 500 Index

1692.56

+36.16

+2.18%

Dow Jones Industrials

15126.07

+323.08

+2.18%

NASDAQ Composite

3760.74

+82.97

+2.26%

Value Line Index

4013.17

+85.75

+2.17%

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 into deeply “Oversold” short-term market conditions resulted in sharp gains Thursday in all of major indexes. All posted gains in excess of 2%.
  • Overall market volume decline 9.7%, however.
  • Despite gains, S&P 500 remains negative on Minor Cycle and must rally above upper edge of 10-Day Price Channel (1695.01 through Friday). Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1650.48 through October 11).
  • Our VIX-based short-term volatility indicator, VBVI, spiked higher Thursday from moderately “Oversold” conditions (26.2%) on Wednesday. Indicator rose 13.2% to 39.3%. Into September 19 short-term high VBVI was at 92.4%.
  • Daily MAAD spiked higher Thursday with 18 issues positive and 2 negative. Indicator remains above uptrend line stretching back to November 2012 lows, but must tack on another 28 positive issues to equal its new high made September 18. Daily MAAD Ratio was last dead even at “Neutral” (1.00).
  • Daily CPFL was only positive by 1.43 to 1 Thursday, in spite of sharply higher options Dollar Volume that was nearly double normal activity. 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 .79.

Market Overview – What We Think:

  • While Thursday was very positive shot in arm for bulls, it remains to be seen if sharp gains will prove to be just a short-covering rally, or beginning of end of short-term downdraft begun after mid-September highs.
  • Measure of skepticism is still warranted since none of major indexes was able to break above upper edge of statistical 10-Day Price Channel to suggest more positive tone on short-term trend. If those levels continue to hold, Minor Cycle will remain negative and potential will remain for resumption of selling.
  • Offsetting bearish potential, fact remains Daily MAAD continues to hold above uptrend line stretching back to last November’s lows. Indicator also held up better than S&P and Dow during recent short-term pullback, which means MAAD could rally to new highs more easily. With indicator also holding at “Neutral” (1.00) there is upside potential.
  • But bottom-line for this market remains in effect – nothing but new highs will re-assert bull trend begun in March 2009. Recently, and despite Thursday’s rally, bullish scenario has become 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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