Selling Tuesday exposes still wobbly stock market

MAAD & CPFL Review

 

Market Snapshot for session ending 10-15-13
 

Last

Day Change

%Change

S&P 500 Index

1698.06

-12.08

-.71%

Dow Jones Industrials

15168.01

-133.24

-.87%

NASDAQ Composite

3794.01

-21.26

-.56%

Value Line Index

4037.15

-34.82

-.85%

Russell 2000

1079.62

-10.68

-.98%

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

Intermediate Cycle* (Medium trend lasting weeks to several months) Neutral / Positive

Major Cycle* (Long-term trend lasting several months to years) Positive

* Cycle status is based on S&P 500.

Market Overview – What We Know:

  • Major indexes succumbed to profit-taking Tuesday. Russell 200 index was biggest loser (-.98%).
  • Market volume rose 18%.
  • S&P 500 must decline below lower edge of 10-Day Channel (1668.06 through Tuesday) to turn Minor Cycle negative. Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1651.61 through October 18).
  • Our VIX-based short-term volatility indicator, VBVI, backed off slightly Tuesday to 52.9% from Monday’s 56.5%. At September 19 short-term high VBVI was at 92.4%.
  • Daily MAAD was negative Tuesday by 4 to 16 and has yet to better September 18 new high. Indicator remains above uptrend line stretching back to November 2012 lows. Daily MAAD Ratio was last “Neutral” at 1.04.
  • Daily CPFL was negative by 1.21 to 1 Tuesday. Options players were unimpressed with market strength even before last week’s rebound. CPFL declined to new short to intermediate low October 9 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 last toward “Neutral” (.95).

Market Overview – What We Think:

  • Results of selling Tuesday left market in much same quandary it faced before Tuesday’s weakness in that bluer chip S&P and Dow 30 did not make new highs over past few sessions while VALUA and TFY did. NASDAQ also failed to make new high by fractions.
  • Profit-taking could prove to be short-lived, but until all of major indexes rally to new highs, staying power of Intermediate and Major Cycles will remain in doubt.
  • While Daily MAAD has been cheer leader for higher prices over past few months, Daily MAAD is now in limbo to extent it remains below its September 18 new high and long-term uptrend line stretching back to November 2012 low. Although there is no negative divergence in MAAD to suggest market high could be imminent, like indexes MAAD too must make another new high to underscore positive tone stimulated by apparent Smart Money buying.
  • And then there’s CPFL that has been moving net lower since June 11 and simply sniffed at strength during past few sessions. If market fails on upside, CPFL remains poised to sink to another set of new lows and its worst levels since last February when S&P 500 was quoted toward 1500.
  • Bottom-line for this market remains in effect – nothing but new highs in all of major indexes will re-assert bull trend begun in March 2009. Selective new highs such as those in secondary indexes may develop, but without S&P and Dow 30 on bandwagon, serious follow-through on upside is highly doubtful.

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

10/14

10/15

10/16

10/17

10/18

10/18

10/31

S&P 500 Index

SELL 1678.95

SELL 1673.92

SELL 1668.06

SELL 1665.65

SELL 1668.65

SELL 1651.61

SELL 1478.59

Dow Jones Industrials

SELL 15044.51

SELL 14982.44

SELL 14920.61

SELL 14884.30

SELL 14909.91

BUY 15317.59

SELL 13737.33

NASDAQ Composite

BUY 3805.33

SELL 3753.78

SELL 3734.18

SELL 3729.41

SELL 3731.09

SELL 3605.27

SELL 3099.00

Value Line Index

SELL 3999.33

SELL 3986.49

SELL 3969.73

SELL 3959.32

SELL 3964.63

SELL 3651.73

SELL 3285.29

Russell 2000

SELL 1069.34

SELL 1065.25

SELL 1060.83

SELL 1056.94

SELL 1057.66

SELL 1023.32

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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