S&P 500, Nasdaq reach for new highs while other falter

MAAD & CPFL Review

 

Market Snapshot for session ending 10-21-13
 

Last

Day Change

%Change

S&P 500 Index

1744.66

+.16

+.01%

Dow Jones Industrials

15392.20

-7.45

-.05%

NASDAQ Composite

3920.04

+5.77

+.15%

Value Line Index

4149.21

-.52

-.02%

Russell 2000

1112.48

-2.29

-.21%

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:

  • S&P 500 and NASDAQ Composite indexes closed at new highs Monday, by fractions, but other majors did not. Dow 30 remains weak.
  • Market volume declined by 14% Monday compared to last Friday’s levels.
  • At new high, S&P 500 must decline below lower edge of 10-Day Channel (1676.88 through Tuesday) to reverse Minor Cycle negative. Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1658.13 through October 25).
  • VBVI, our VIX-based short-term volatility indicator was higher Monday (86.0%) and continues to approach “Overbought” levels. At September 19 short-term high VBVI was at 92.4%.
  • Daily MAAD was flat Monday with 10 issues positive and 10 negative. Indicator made new high last Friday and remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was last marginally “Overbought” at 1.41.
  • Daily CPFL was higher again Monday after improvement late last week, but indicator remains well below June 11 short to intermediate-term high, uptrend line stretching back to October 2011, and major resistance peak made February 2011. CPFL Daily Ratio was last marginally “Overbought” at 1.16.

Market Overview – What We Think:

  • In face of short-term vulnerability on Minor Cycle, as measured by price-based Trading Oscillators, we would not be surprised to see short-term positive trend begin to falter at any time.
  • With failure of Dow 30 relative to other indexes that made new highs, there is structural weakness in market that will not be glossed over easily, considering importance of Dow to broad market.
  • And while Daily MAAD eked out new high last Friday, that peak was created with less enthusiasm than occurred previously and since last November when Daily MAAD led market on upside. This time around it followed S&P to new highs to suggest Smart Money just might be less enthusiastic about market this time around than earlier in rally that is now nearly a year old.
  • At same time, and despite net gains in CPFL over past few days, options players have been generally disregarding market price strength since June 11 when CPFL topped. 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 for market.
  • Simply put, all of major indexes and Daily MAAD must rally to new highs or staying power of Intermediate and Major Cycles is in doubt. Nothing but new highs will fully re-assert bull market begun in March 2009.

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

10/21

10/22

10/23

10/24

10/25

10/25

10/31

S&P 500 Index

SELL 1672.68

SELL 1676.88

SELL 1681.67

SELL 1688.57

SELL 1698.60

SELL 1658.13

SELL 1478.59

Dow Jones Industrials

SELL 14944.13

SELL 14981.99

SELL 15020.63

SELL 15067.58

SELL 15126.27

SELL 15060.15

SELL 13737.33

NASDAQ Composite

SELL 3735.68

SELL 3743.95

SELL 3756.38

SELL 3769.68

SELL 3792.76

SELL 3627.83

SELL 3099.00

Value Line Index

SELL 3974.48

SELL 3983.81

SELL 3993.92

SELL 4009.66

SELL 4032.25

SELL 3871.30

SELL 3285.29

Russell 2000

SELL 1061.01

SELL 1063.66

SELL 1067.56

SELL 1071.98

SELL 1079.12

SELL 1028.78

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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