Stock market fades again, as short-term trend looks wobbly

MAAD & CPFL Review

 

Market Snapshot for session ending 10-31-13
 

Last

Day Change

%Change

S&P 500 Index

1756.54

-6.77

-.38%

Dow Jones Industrials

15545.75

-73.00

-.47%

NASDAQ Composite

3919.70

-10.91

-.28%

Value Line Index

4150.98

-13.31

-.32%

Russell 2000

1100.15

-5.35

-.48%

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

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 selling developed in major indexes Thursday. Russell 2000 was again largest loser on day at -.48%.
  • Market volume increased 22% on weakness.
  • Short-term trend remains positive in S&P 500 and bellwether must sink below lower edge of 10-Day Price Channel (1737.24 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 (1662.76 through November 1).
  • Our VIX-based volatility indicator, VBVI, now “Overbought” on Minor Cycle, rose fractionally Thursday to 92.62% from Wednesday’s 92.58%. At September 19 short-term high VBVI peaked at 92.4%.
  • Daily MAAD was negative Thursday with 6 positive issues to 14 negative. Indicator continues to hold below its October 22 high, but remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was last “Neutral” at .98.
  • Daily CPFL was positive Thursday by 1.77 to 1 and rallied to highest level since October 9 short-term low. 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 “Overbought” at 1.57.

Market Overview – What We Think:

  • Odds are increasing broad market is working to put in place short-term high. Increasing volume on weakness and near-term “Overbought” price-based oscillators underscore that notion.
  • Coupled with fact Daily MAAD peaked back on October 22 with indicator refusing to make new highs with prices since then, there is suggestion Smart Money has been selling into strength for better part of past two weeks and even though Daily MAAD has been cheerleader for uptrend since last November.
  • While admittedly it wouldn’t take much buying to cause move to new high by Daily MAAD (23 positive issues), fact that Daily MAAD did not make new highs with pricing is worrisome. Ongoing failure could create bigger problems of next larger Intermediate Cycle, especially if Daily MAAD fractures year-old uptrend line on downside.
  • At same time, and despite recent gains in CPFL since October 9 low in indicator, there is still larger statistical overhang in CPFL pinpointed by June 11 high that remains nearly 50% above current levels. Adding to CPFL worry is fact CPFL Daily Ratio has moved back to short-term “Overbought” level not seen since last May. Confluence of CPFL weaknesses is suggestive of weaker market pricing.

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

10/28

10/29

10/30

10/31

11/1

11/1

11/30

S&P 500 Index

SELL 1708.47

SELL 1718.19

SELL 1725.16

SELL 1731.34

SELL 1737.24

SELL 1662.76

SELL 1500.00

Dow Jones Industrials

SELL 15186.03

SELL 15243.50

SELL 15284.59

SELL 15322.64

SELL 15367.60

SELL 15072.89

SELL 13944.86

NASDAQ Composite

SELL 3818.92

SELL 3841.47

SELL 3857.23

SELL 3872.38

SELL 3887.57

SELL 3652.09

SELL 3145.05

Value Line Index

SELL 4057.03

SELL 4080.71

SELL 4098.42

SELL 4114.02

SELL 4127.93

SELL 3892.95

SELL 3358.97

Russell 2000

SELL 1086.50

SELL 1093.25

SELL 1097.63

SELL 1101.94

SELL 1105.63

SELL 1034.92

SELL 887.74

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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