Market perks higher again Thursday, but Dow 30 still no show

MAAD & CPFL Review

Market Snapshot for session ending 10-17-13

 

Last

Day Change

%Change

S&P 500 Index

1733.15

+11.61

+.67%

Dow Jones Industrials

15371.65

-2.18

-.01%

NASDAQ Composite

3863.14

+23.71

+.62%

Value Line Index

4116.61

+34.52

+.83%

Russell 2000

1102.27

+9.85

+.90%

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

Intermediate Cycle* (Medium trend lasting weeks to several months) 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:

  • More buying Thursday pushed all of major indexes except Dow 30 to new highs and best levels since march 2009.
  • Market volume was higher by 8.4%.
  • At new high, S&P 500 must decline below lower edge of 10-Day Channel (1668.65 through Friday) 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).
  • VBVI, our VIX-based short-term volatility indicator, rose again Thursday and was last plotted at 77.1% and up from Wednesday’s 65.5%. At September 19 short-term high VBVI was at 92.4%.
  • Daily MAAD was higher by 15 to 4 Thursday with 1 issue unchanged. Indicator has yet to make new high even though it was last only 5 positive issues shy of September 18 peak and best level since March 2009. Daily MAAD does, however, remain above uptrend line stretching back to November 2012 lows. Daily MAAD Ratio was last marginally “Overbought” at 1.41.
  • Daily CPFL was sharply higher Thursday by 7.74 to 1. But despite Thursday’s gain, options players have been buying more Puts on Dollar Value basis than Calls since indicator peaked last June 11 and remained unimpressed by market strength over past several days. CPFL declined to new short to intermediate low October 9. That level was worst since last February when S&P 500 was quoted near 1500. Indicator is below long-term uptrend line stretching back to October 2011. CPFL Daily Ratio is last marginally “Overbought” at 1.19.

Market Overview – What We Think:

  • New high in S&P Thursday along with COMPX, VALUA, and TFY was encouraging from bullish point-of-view, but ongoing failure of Dow 30 to muster any upside steam is not only a puzzle, but also presents a problem for bullish crowd. How can bull market persist if bellwether index isn’t also making new highs?
  • While it remains to be seen whether or not Dow 30 will gain some traction on upside and get in step with other indexes at new highs remains to be seen. But with some short-term stats already flirting with moderately “Overbought” levels, time could be running out for blue chip index.
  • There is also a problem now with Daily MAAD to extent indicator has yet to make new high and even though MAAD has been “higher prices cheerleader” for past several months. Although only another 5 positive issues are necessary for indicator to make new high, those 5 are now critical to Daily MAAD confirmation of bull trend.
  • Simply put, until all of major indexes and Daily MAAD rally to new highs, staying power of Intermediate and Major Cycles remains in doubt since nothing but new highs will fully re-assert bull market begun in March 2009.
  • And while CPFL perked noticeably higher Thursday, options players have simply been disregarding market price strength since June 11 when CPFL topped, and also over past week when majority of indexes made new highs. If market ultimately fails on upside to extent all of indexes do not make new highs, CPFL is poised to sink to another set of new lows and its worst levels since last February when S&P 500 was quoted toward 1500. Such action would be negative market omen.

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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