Major indexes up Thursday, but key indicator showing weakness

MAAD & CPFL Review

 

Market Snapshot for session ending 10-24-13
 

Last

Day Change

%Change

S&P 500 Index

1752.07

+5.69

+.33%

Dow Jones Industrials

15509.21

+95.87

+.62%

NASDAQ Composite

3928.96

+21.88

+.56%

Value Line Index

4170.20

+19.24

+.45%

Russell 2000

1118.84

+7.90

+.71%

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:

  • Major indexes posted small gains Thursday with Russell 2000 closing at new high. Dow 30 reached its best closing levels since October 8.
  • Market volume rose by just under 2%.
  • S&P 500 must decline below lower edge of 10-Day Price Channel (1698.60 through Friday) to reverse Minor Cycle to negative. Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1658.13 through October 25).
  • Our VIX-based short-term volatility indicator, VBVI, rose Thursday to 90.1% and continues to approach “Overbought” levels. At September 19 short-term high VBVI peaked at 92.4%.
  • Daily MAAD, despite higher index prices Thursday, were negative by 9 to 11. Indicator remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was marginally “Overbought” at 1.25.
  • Daily CPFL was positive Thursday by 1.56 to 1 and reached best level since end of August. But CPFL 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 “Overbought” at 1.78.

Market Overview – What We Think:

  • Higher prices Thursday and even new closing high in TFY had little effect on Daily MAAD that was actually negative on day. This kind of disparity in face of higher pricing is very thing that would begin to suggest Smart Money is using strength to exit market.
  • And also, despite Thursday’s strength in Dow 30, bellwether index continues to lag other major indexes relative to recent, and current, highs. That structural weakness in market will not be glossed over easily, considering importance of Dow to broad market.
  • At same time, and despite net gains in CPFL over past two weeks, options players have been less bullish about market price strength since June 11 when CPFL topped out on short to intermediate term. If market ultimately fails on upside, CPFL could easily sink to new lows and its worst levels since last February when S&P 500 was quoted toward 1500.
  • Simply put, all of major indexes including Dow 30 must rally to new highs or staying power of Intermediate and Major Cycles will be 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.

Next page: Indicator review

Comments
comments powered by Disqus